What Is Capital Gains Tax?
Did you know that, as a property owner, you are expected to pay a percentage of the profit that you earn when you sell your investment? This is what is known as capital gains tax. Capital gains tax is the tax levied on the profits from the sale of investments, if the investment was held for at least a period of one year before being sold. The taxable percentage differs from person to person, as it is calculated based off your taxable income of the year.
Did you know that there is a very high change you are exempt for paying capital taxes? It’s all thanks to something the government did, called Taxpayer Relief Act 1997. This was one of, if not the largest tax reduction law passed by the US government. This act offered relief to college students, parents, small business owners and others new to the investment world through different benefits. This is what an overview of these exemptions looks like to different population categories:
The IRS offers an exemption on the first 250,000 for those who are single and 500,000 for those who are married and are filing taxes jointly. One thing to remember though is that, when it comes to homes, this rule is applicable only towards the primary residence of the owner and can only be allowed once every two years.
According to recent reports by investment advisory companies, “Short-term capital gains are taxed as ordinary income, with rates as high as 37% for high-income earners; long-term capital gains tax rates are 0%, 15%, 20%, or 28%, with rates applied according to income and tax filing status.”
How does the IRS determine which home is your primary residence? It’s quite straightforward – you should’ve lived in that house for at least 2 years over the past 5 years. This means that out of 1825 days, you should’ve stayed at this particular property for 730 days or more. This best thing about this is that these 2 years don’t have to be consecutive!
|Filing Status||0% Tax Rate||15% Tax Rate||20% Tax Rate|
|Single||< $41,675||$41,675 to $459,750||> $459,750|
|Married filing jointly||< $83,350||$83,350 to $517,200||> $517,200|
|Married filing separately||< $41,675||$41,675 to $258,600||> $258,600|
|Head of household||< $55,800||$55,800 to $488,500||> $488,500|
Applicable to the Sale of a Principal Residence
Another tip for you to be exempt from paying capital gains taxes is to reinvest the proceeds into another property though a 1031 Exchange.
Don’t wait! Start investing in profitable real estate ventures with the help of TC Global and their team of highly qualified brokers and advisors.
Newsletter / Jun 08, 2022
We have listed the best ways through which you can make money in a low risk manner. Create wealth using these investment options. It is the easiest way to get rich.
Newsletter / May 11, 2022
Whether you are buying property or selling property, closing is a crucial part that will make or break your deal. We have listed major pointers that will help you deal with your next closing much better.
Newsletter / Feb 09, 2022
Want to invest and make money? We have listed out the pros and cons of the real estate market and the stock market so that you can decide if you want to invest in stocks or real estate.
Newsletter / Feb 25, 2022
We have compiled a list of top real estate words you need to know whether you are a real estate agent or are looking to buy a house or buy a commercial property. This is the real estate lingo you should know.
Newsletter / Feb 01, 2022
What if you were told that you could earn regular dividends from your investments without the hassles relating to buying, managing or even financing a property?
Newsletter / Jan 27, 2022
2021 was a big year for real estate in many ways, but the biggest news of the year came towards the end of it when billionaire magnate, Elon Musk announced his move from California to Texas.