Selling investment property

3 Replies

Hello, 

Out of curiosity, if I were to sell my investment property before a year of ownership, is there any additional capital gains tax applied to the already set rate? Also what if you didn’t even make any profit from the original amount of money you had invested? Does the capital gain regulation apply anymore? Probably not

@Account Closed If you are thinking of selling, consulting an accountant would be a really good idea. As I understand it, if you sell within one year, you are taxed at your regular income tax rate. After one year, it is taxed as capital gains.

Account Closed said, gains on the sale within a year of purchase (short-term capital gains) are taxed at your ordinary income rates. They're still considered capital gains but the STCG rates equal ordinary income rates.

If the holding period is longer than a year, you will benefit from the long-term capital gains rates, which are significantly lower.

Keep in mind, if you're flipping properties and are classified as a "dealer", the properties are considered inventory. This means the profits are subject to ordinary income tax rates (no matter the length of time you held it) PLUS self-employment taxes.

So practically I would lose money if I were to sell the rental property under one year because I am taxed on the amount of money that I essentially put out and also have to pay closing costs...