How to Calculate Capitol Gain in Greater New Haven CT Real Property Sales
When you sell a property, you owe taxes on your gain. Here are some important considerations. In real estate, capital gains are based not on what you paid for the home, but on its adjusted cost basis. You may benefit from utilizing a 1031 exchange when buying another property in a defined time period.
To calculate, follow these steps:
1. Purchase price is the price of the home is the sale price, not the amount of money you actually contributed at closing. $ 300,000
2. Total adjustments:
a) Closing Costs of Existing House — including transfer fees, attorney fees, and inspections, but not points you paid on your mortgage.(ADD )$3000
b)Cost of sale — including inspections, attorney fees, real estate commission, and money you spent to fix up your home just prior to sale.(ADD)$29,000
c)Cost of improvements — including room additions, deck, etc. Note here that improvements do not include repairing or replacing something already there, such as putting on a new roof or buying a new furnace. (ADD)$67,000
3. Your home’s adjusted cost basis: (1+2a,b,c) $399,000
.Subtract the amount your home sells for. (DEDUCT)$ 550,000
4. Your capital gain: $151,000
A Special Real Estate Exemption for Capital Gains
Since 1997, up to $250,000 in capital gains ($500,000 for a married couple) on the sale of a home is exempt from taxation if:
1) You have lived in this home as your primary residence for two of the last five years
2) You have not sold or exchanged another home during the two years preceding the sale
3) You experience what the IRS calls “unforeseen circumstances,” such as job loss, divorce, or family medical emergency
Despite my 20 years of experience and commitment to your success, I always advise you to seek the counsel of an attorney when completing a real estate transaction, and an accountant when reviewing your income and expenses.