capital gains?

Question

Do you pay capital gains only on rental property or also on a single dwelling houese?

Answer 1

Regards to capital gains,

You can claim it every year at your tax return.
You can claim CG for rental property in 2 ways:
1) Claim( gain/lost ) at when the property exchange ownership
2) Claim each year at end-of-year, only the increase for that year.

Advantage on 1)
a) Generate higher cashflow for the duration of the ownership
b) Simple tax return
Disadvantage on 1)
a) High CG ( potential ) at year of selling

Advantage on 2)
a) Smaller claim each year might offset by rental lost
b) At year of selling or change ownership, not much tax need to pay

Disadvantage on 2)
a) Complicated tax return
b) Need accountant/financial planner to figure it out the whole plan

Answer 2

capital gains is if you sell the property. Anything that you own and sell for a profit would be subject to capital gains on the profit. Whether it is a rental property or house you still would pay. However if you own the house as an INVESTMENT property and have owned it for more than 1 year than the tax liability would be taxed as a long-term investment and it would be less. It has to be an investment property, not your personal home. http://www.irs.gov/

Answer 3

Unless you do a 1031 exchange on the sale of your rental property (doesn't matter if it is single dwelling or duplex etc.), you would most likely have to pay capital gains tax.

For your personal residence (home), the tax laws are different.

Report the sale of your main home on your tax return only if you have a gain and at least part of it is taxable.

If you meet the ownership and use tests, you will generally only need to report the sale of your home if your gain is more than $250,000 ($500,000 if married filing a joint return). This means that during the 5-year period ending on the date of the sale, you must have:

Owned the home for at least 2 years (the ownership test), and
Lived in the home as your main home for at least 2 years (the use test).

If you owned and lived in the property as your main home for less than 2 years, you may still be able to claim an exclusion in some cases. The maximum amount you can exclude will be reduced.
It is not the money you receive for the sale of your home, but the amount of gain on the sale over your cost, or basis, that determines whether you will have to include any proceeds as taxable income on your return.

There is no limit on the number of times you can exclude the gain on the sale of your principle residence so long as you meet the ownership and use tests.

If, during the 5-year period ending on the date of sale, you owned the home for at least 2 years and lived in it for at least 2 years, you can exclude up to $250,000 of the gain ($500,000 on a joint return in most cases). However, you cannot exclude the portion of the gain equal to depreciation allowed or allowable for periods after May 6, 1997. Since you cannot exclude all of the gain, report the entire gain realized on Schedule D of the form 1040 line 8. Report the amount of exclusion you qualify for on the line directly below the line on which you report the gain. Write Section 121 exclusion in column (a) of that line and show the amount of the exclusion in column (f) as a loss (in parentheses).

Usually, the home you live in most of the time is your main home and can be a:

House,
Houseboat,
Mobile home,
Cooperative apartment, or
Condominium.
To exclude gain under the rules in chapter 2, you generally must have owned and lived in the property as your main home for at least 2 years during the 5-year period ending on the date of sale.
Land. You may sell the land on which your main home is located, but not the house itself. In this case, you cannot exclude any gain you have from the sale of the land.

Example. On March 3, 2000, you sell the land on which your main home is located. You buy another piece of land and move your house to it. This sale is not considered a sale of your main home, and you cannot exclude any gain on the sale.

More than one home. If you have more than one home, you can exclude gain only from the sale of your main home. You must pay tax on the gain from selling any other home. If you have two homes and live in both of them, your main home is ordinarily the one you live in most of the time.

Example 1. You own and live in a house in the city. You also own a beach house, which you use during the summer months. The house in the city is your main home; the beach house is not.

Example 2. You own a house, but you live in another house that you rent. The rented house is your main home.

Property used partly as your home.
If you use only part of the property as your main home, the rules discussed in this publication apply only to the gain or loss on the sale of that part of the property. For details, see Business Use or Rental of Home in chapter 2.