capital gains on rental prop?

Question

i paid 25k for a house in december of 2016. i was offered 59k today to sell.  that's a 34k profit.

does my effective tax bracket when i file with my wife, effect my capital gains tax in this situation?   i'm not looking for exact numbers, but what is a rough percentage i should expect to may on a property i owned for under one year?

is there a substantial difference if i wait longer than a year?

we have a combined income of 155k. my account is out of the office for another week. i'm here to see if i can find an answer.

thank you.

Sam Bates · Answer

@Robert Hastings Michael is correct. It would be short term capital gains. If a property is sold before a year of ownership it's short term capital gains instead of long term capital gains and the profit would be based on your tax bracket. Long term capital gains tax is at 15%If you make 155K in 2017 plus the profit from your house you would fall into the 28% tax bracket.  You can include any expenses you have incurred to reduce your cost basis, but if you have a profit of 34K you would pay around 10K in tax.If you have another piece of real estate lined up to purchase you can do a 1031 exchange that exempts you from paying tax on the profit. There are rules you have to follow and need a 1031 exchange intermediary, but this could be the best way to go.

Buddy Holmes · Answer

@Robert Hastings, not sure if I understand your question fully, but December 2016 to today is less than one year hence it will not be capital gain.

Did i miss your point?

Cheers,

Buddy

Michael P. · Answer

It would be short term capital gains.

Make sure you include any and all expenses going in, during, and selling to get your basis to calculate profit.

If you wait a year, you will only pay long term capital gains, yes there is a huge difference.  I am not going to look it up but I believe you guys are about 30% at that earnings level so it is a difference of about 15% or 5k.

I am not an accountant so take what I say with a grain of salt, some really good sea salt.