Ignite FB Tracking PixelWhat is capital gain on real estate? - Nicki Barnett
Nicki  Barnett
Nicki Barnett, Listing LeadersPhone: (219) 406-3081
Email: [email protected]

What is capital gain on real estate?

by Nicki Barnett 05/18/2023

blue picture with computer graphic design

Among the myriad costs associated with selling a home, taxes for capital gain on real estate can take up a significant portion. You'll have to pay capital gains tax depending on how long you've owned the property before selling it, and rates can vary by region.

Here is a basic rundown of capital gains tax to help you learn more:

Short-term versus long-term capital gains tax

When you start thinking about selling an investment property, one of the most important questions to ask is, “When did I purchase it?” Capital gains and losses can occur over short or long periods, and have different tax rules. If you've had the asset for less than a year, it counts as short-term.

How much capital gains tax can I expect to pay on real estate?

Short-term capital gains taxes use the same percentage as income taxes, which can be upwards of 37%. A long-term capital gain on a property you've owned for more than a year is taxed at a lower rate of 15% to 20%.

How real estate taxes work

State and local authorities collect taxes on real estate to support public services, school projects and other services - just like income tax. However, real estate tax rates are determined by multiplying current tax rates by the value of the properties. Tax rates vary among jurisdictions and may vary depending upon the assessed value of the home.

How to avoid capital gains tax on home sales

The simplest way to reduce the cost is to stay in your house for more than one year. This will take you from short term capital gain into long term capital gain, and a lower tax rate.

You can avoid capital gains tax by completing a 1031 exchange, which is a specific type of real estate transaction for investment properties. This is a popular method among real estate investors, but only works if the property you're selling is not your primary residence.

Taxes can be complicated, and real estate is no exception. However, understanding these basics will help you better navigate the real estate world and make the best financial decisions for your future.

About the Author
Author

Nicki Barnett

Welcome!! I’m glad you stopped by and I cannot wait to work with you!
Using my enthusiastic personality, entrepreneurial drive and caring nature is ideal for helping me to connect with & identify each of my clients desires towards their real estate goals. These qualities along with my experience in the home buying, selling & building process, allow me to efficiently guide my clients in their home selling or buying process.

Born & raised in Northwest Indiana and currently reside in Valparaiso with my husband Mike, our son Hayden & dog Gadget. In addition to my passion for Real Estate, I also work alongside them helping to run our local family-built Plumbing/HVAC businesses.

We enjoy spending most of our free time together with family & friends at our Lake House in Monticello!

I’m here for your Selling & Buying needs, Proudly representing NWI, Monticello & surrounding areas!
I’m your go to Real Estate Agent!!