Capital gains taxes on sell property

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Capital gains taxes on sell property

Horacio Gutierrez
Rental Property Investor · Downey, CA · Member since 2017 · 347 posts · 25 votes

Hello,

Say I sold a home and I paid capital gain taxes because I lived in there home more than 1 year. Where my capital gain was $50,000 my capitals gains tax bracket was 10% which leaves with $45000 profit. Do I have to add those $45000 to my income and then I pay taxes and my ordinary tax bracket wiil be the $45000 plus my work income, do I get taxed twice?

Thanks,

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  • Michael PlaksPro Member
    Tax Accountant / Enrolled Agent · Houston, TX · Member since 2014 · 5k+ posts · 6k+ votes
    7y

    @Horacio Gutierrez

    You are never taxed twice.

    Taxes are figured after the end of the year. Say you had a $100,000 salary and a $50,000 capital gain. You then have a total income of $150,000 which is subject to tax, after some subtractions. Let's say that after those subtractions you have  $125,000 left.

    Of that $125,000, you will pay capital gain taxes on $50,000 and ordinary income taxes on the remaining $75,000. Never twice.

    I recommend you start a relationship with an accountant, since your understanding of taxes is shaky.

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  • Alex Rodriguez
    Real Estate Agent · South/Central Florida · Member since 2018 · 13 posts · 3 votes
    7y

    Wait. Is it your primary home since you said you lived in it? Then you dont pay C.G. for a primary. If its a rental then why dont you 1031 exchange the C.G?

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  • Horacio Gutierrez
    OP
    Rental Property Investor · Downey, CA · Member since 2017 · 347 posts · 25 votes
    7y

    Can you explain what this mean "The IRS recognizes an installment sale as a way to defer a capital gain on a property sale. This can save on taxes by avoiding a bump up into a higher tax bracket if the seller had a huge gain." How do you pay less taxes by doing an installment sale, I thought your capital gains had it's own tax bracket amd ordinary had it's own tax bracket. How does capital gains lower you ordinary tax bracket, also in seller finance is the interest tax a ordinary tax or still capital gains tax?

    Thanks,

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  • Natalie KolodijBusiness Member
    Moderator
    Tax Strategist| National Tax Educator| Accepting New Clients · Member since 2014 · 3k+ posts · 4k+ votes
    7y
    Originally posted by @Alex Rodriguez:

    Wait. Is it your primary home since you said you lived in it? Then you dont pay C.G. for a primary. If its a rental then why dont you 1031 exchange the C.G?

    You have to have lived in your primary for 2 of the last 5 years to exclude gains. He said he lived in it 1 year. 

    I think it's a hypothetical

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  • Michael PlaksPro Member
    Tax Accountant / Enrolled Agent · Houston, TX · Member since 2014 · 5k+ posts · 6k+ votes
    7y
    Originally posted by @Horacio Gutierrez:

    Can you explain what this mean "The IRS recognizes an installment sale as a way to defer a capital gain on a property sale. This can save on taxes by avoiding a bump up into a higher tax bracket if the seller had a huge gain." How do you pay less taxes by doing an installment sale, I thought your capital gains had it's own tax bracket amd ordinary had it's own tax bracket. How does capital gains lower you ordinary tax bracket, also in seller finance is the interest tax a ordinary tax or still capital gains tax?

    We cannot really explain this, because it's more advanced than your current understanding of taxes. Basics first. I recommend starting a relationship with a good accountant. Or, if you prefer, there're books and classes.

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  • Horacio Gutierrez
    OP
    Rental Property Investor · Downey, CA · Member since 2017 · 347 posts · 25 votes
    7y

    Any book you recommend would explain this?

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  • Michael PlaksPro Member
    Tax Accountant / Enrolled Agent · Houston, TX · Member since 2014 · 5k+ posts · 6k+ votes
    7y
    Originally posted by @Horacio Gutierrez:

    Any book you recommend would explain this?

     Maybe this one

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  • Lane Kawaoka
    Rental Property Investor · Honolulu, HAWAII (HI) · Member since 2011 · 4k+ posts · 2k+ votes
    2y

    When selling your primary residence, you're eligible for a significant tax advantage: individuals can exclude up to $250,000 of capital gains from their income, and married couples filing jointly can exclude up to $500,000. This exemption can substantially reduce or even eliminate your capital gains tax obligation, depending on the profit you realize from the sale. It's a key strategy for homeowners to consider when planning their sale and assessing their potential tax implications. For rentals its a different story.

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