Capital gains

3 Replies

We purchased a foreclosure last year and have been working on it (remodeling) since then. We are finally tired of working every weekend so we've found a buyer who will purchase as is (not completed).
of course, in last years taxes we had plenty of write-off for this rehab and we
have continued it into this year.
our question is, since we will be selling the property for more than our purchase price, will we be liable for the capital gains tax on everything above our original purchase price or will we be able to deduct all the money we have put in? we are actually taking a small loss after calculating all our expenses associated with this property.

Thanks for your responses.

Yes, you can deduct ANY and everything that went into the home for repairs and what not. As long as the bottom line does not show a gain, you will pay no gains tax for that.

BM is correct. All the expenses that went into the house raise the "basis". You subtract the basis from your net selling price (sales price less closing costs) and that's your gain.

However, some items might be expenses last year, and should have been deducted on last years taxes. Your accountant should be able to help identify which expenses go where, and may find a few you don't recall. Mileage back and forth, and while looking at properties, etc., is all deductible, for instance.

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