Real Estate Investor · Cebu, Philippines · Member since 2008 · 297 posts · 5 votes
I was wondering what the tax difference is between selling a home before owning it for one year or after owning it for a year.. Is there a set tax percentage rate for both?
Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes
14y
If you sell a house you've owned more than one year the gains are "long term capital gains". They are taxed at 15% (currently). If you own it for less than one year, the gains are taxed at short term capital gains rates, currently the same as your marginal rate. That's usually a higher rate than the 15% long term rate, but it depends on your personal situation.
That assumes you're not selling a personal residence and that you're not a dealer.
Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes
14y
If you sell a house you've owned more than one year the gains are "long term capital gains". They are taxed at 15% (currently). If you own it for less than one year, the gains are taxed at short term capital gains rates, currently the same as your marginal rate. That's usually a higher rate than the 15% long term rate, but it depends on your personal situation.
That assumes you're not selling a personal residence and that you're not a dealer.
Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes
14y
Yes, but there is no 20% tax bracket currently. And, if the gains push you over the threshold to a higher bracket, some of the income would be subject to the higher rate. I think. Not a CPA.
Accountant, Enrolled Agent · Grayslake, IL · Member since 2011 · 5k+ posts · 2k+ votes
14y
As one of the resident tax guys I can confirm as Jon said. That it can mean long or short term capital gains. In order to qualify as long term it must be held one year and one day or more. Otherwise it will be considered short term gain. Which will be added to your income at the regular rates. By adding it to your regular income you are itching to be pushed up into a higher tax bracket.
Accountant · Hyattsville, MD · Member since 2011 · 120 posts · 44 votes
14y
The main difference if it is a property held for investments is that the short term capital gains rate is your effective tax rate which can range from 10% - 35% but a long term capital gains rate is 15%. There is a set tax % for the long term but the short term is based on your individual tax rate.
Real Estate Investor · Cebu, Philippines · Member since 2008 · 297 posts · 5 votes
14y
That is great!! It is pretty hard for people to make a buck in this day and age and not be taxed like crazy. 15% is a great rate.. I knew there was a difference between the long and short gains but I didnt know that long term one was that low..
Developer · Garland, TX · Member since 2008 · 8k+ posts · 4k+ votes
14y
Originally posted by Andy Bankston:
Is the one year + one day based on the day you close on the property? Date the deed is recorded?
It's based on when you close (buy) the property.
If you have a substantial gain and want to invest the proceeds into another property, you may want to look into a section 1031 exchange which can help you pay no capital gains tax, or at least defer the tax.
Accountant, Enrolled Agent · Grayslake, IL · Member since 2011 · 5k+ posts · 2k+ votes
14y
Originally posted by Jon Klaus:
Originally posted by Andy Bankston:
Is the one year + one day based on the day you close on the property? Date the deed is recorded?
It's based on when you close (buy) the property.
If you have a substantial gain and want to invest the proceeds into another property, you may want to look into a section 1031 exchange which can help you pay no capital gains tax, or at least defer the tax.
Just remember that a 1031 exchange is not available if you are flipping the properties. They must be held as rentals or for appreciation.