How much is property gains tax and when do you pay it?

Question

I'm a first -time home owner, and I'm going to sell my primary residence less than 1 year from when I bought it. How do I know how much my property gains tax will be? When do I pay the tax? At closing when I sell or at a certain time of the year?

Answer 1

The amount of tax will depend on your gain on the house, and on your total income for the year. Since you'll be selling it within one year after buying it, any gain will be short-term so will be taxed as ordinary income, which means at the same rate as that amount would be in wages, except that you won't pay social security and medicare on it.

The tax will be due when you file your income tax return for the year. If you have a large gain, you should make an estimated payment, using form 1040ES, when you sell it.

Answer 2

The primary residence exclusion is for people who have lived and owned their home for two of the past five years. The exclusion is $500,000 for a married couple filing jointly, $250,000 for a single person.

Some people qualify for an pro-rated share of the exclusion based upon the reason for which they move. For example if you are moving because of work related reason, health related illness, or other unforeseen circumstance.

Your gain is determined by you basis in the property you are selling. Normally that is your original purchase price plus any capital improvements. Take your new sales price less costs to sell and subtract your basis. If positive, then this amount is taxable. The taxes are paid when you file your tax return unless you files quarterly returns.

Answer 3

You may not have a profit at all.
Your profit is what you paid for the home plus the cost of purchasing like loan fees minus the sales price and the cost of selling like the real estate commissions. So if you put down a big down payment you might get some money but it might not be profit even if you sell for more than you paid for the home.