Capital Gains - What it is
When you sell your home for profit the Internal Revenue Service or IRS usually wants a chunk of your profits. “Capital gains” is the term used for the increase of value on an asset -- in this case, your property. If your home for sale in Allen has appreciated in the time you owned it and you've made money when you sold it, you may owe capital gains tax.
It doesn't matter whether the home you sell is the home you live in, a vacation home, or a home that you've bought for an investment, fixed it up, and sold it for more money. This includes whether you have a home or homes for sale in Allen.
Exemptions for Capital Gains Tax
There are exemptions for home owners who earn capital gains. If you've lived in your home for two years out of the past five and your capital gains is less than $250,000 if you are single and $500,000 if you are married and filing jointly.
If you can't exclude part or all the capital gains from taxes, you'll have to include the capital gains on your tax return. So, if you sell a home that you haven't lived in for two years or you make a profit of more that $250,000 (or $500,000, if you're married), you are not exempt from capital gains tax.
What if you do have to pay capital gains tax? The best thing to do is talk to a licensed tax advisor and sees what your options are when it comes to taxes and your investments. You may be able to find ways to offset this tax.
Another tax that has appeared recently is the Obamacare or Medicare tax that went into effect in 2013. Those who make $200,000 or more adjusted gross income ($250,000 for married couples) who also fail to be exempt from the capital gains tax will have to pay a 3.8 percent Medicare tax on top of what you already pay for capital gains.
This tax affects very few people so it's unlikely that you would have to pay it. If you do have to pay it, you may need to consult with a tax advisor for the best way to handle this extra tax and find out if there are any ways to offset it.
What Else Do I Need to Know?
If your home for sale in Allen is exempt from capital gains tax, you may not have to report it to the IRS come tax time and when reporting other capital gains on your return. But consult a tax advisor before thinking you don't have to report it. That way, you can be sure that you stay out of trouble with the IRS when tax season rolls around.
If you have a home for sale in Allen, you may be wondering what taxes you may be required to pay once your home is sold. The good news is that you may not have to pay any taxes on your gain, depending on your situation. Here's a rundown of what you need to know.