Here’s something you might want to do some research on before you sell your home! If you are one of the lucky few in this economy that have made a profit on your home, you might be worried about capital gains tax.
Not sure what capital gains tax is?
“Capital gains taxes are charged when you sell something that’s increased in value such as an investment like a stock or property. If you held onto the asset for more than a year before you sold it, then you are taxed on a long-term capital gain at a tax rate of 0% to 20%.
If you owe taxes, the amount you will pay depends on your tax bracket.
- If you’re in the 10% to 15% tax bracket, your capital gains tax rate is zero.
- If you’re in the 25% to 35% tax bracket, your capital gains tax rate is 15%.
- If you’re in the 39.6% tax bracket, your capital gains tax rate is 20%”
– via Michelle, Realtor.com
Luckily there are some exemptions for those who may have to pay tax!
If you are single there is a $250,000 exemption from your taxes, if you are filing joint there is a $500,000 exemption from your taxes. Sounds great huh!? But there are some requirements. The home must be your primary residence, you must have owned the property for a minimum of two years, and you must have lived there for at least two of the past five years. This alone can save some from having to pay a huge amount when it comes to taxes.
Don’t qualify for that? There’s one more way that you can possibly be exempt from taxes. If you have put any money on home improvements toward the house, then you can use those improvement costs to take away from the income of the home. This is one of the many reasons you should always keep track of how much you’ve invested in your home.
There may be other ways to be exempt but that would require talking to a tax consultant or your tax adviser! Make sure you know all of your options before you make a move you might regret.