Looking to sell your home? Better watch out, because Uncle Sam may end up sharing a piece of that action. A “capital gains tax” is triggered when you sell an asset for more than what you spent to acquire it. While typically applied to investments, this tax is also due when real-estate transactions occur. For example, if you were to sell a car for $2,000, but had purchased it for $1,000, the difference is considered a “capital gain,” which you’ll need to declare on your tax returns. While that same logic applies to homes, an exemption may apply if you meet three important conditions: You’ve owned the home for at least two years; You’ve lived in the home for at least two years; and You’ve not used the capital gains exemption on another home sale in the last two years. If you’ve answered yes to all three of those requirements, you may be able to exclude up to $250,000 of your gain, if you're single, and up to $500,000 if you're married, filing jointly. (To find out how much your capital gain is, subtract your purchase price from the sale price.) According to Matt Becker, a financial planner and founder of Mom and Dad Money, LLC, “You pay a higher capital gains tax rate on investments you've held for less than a year, often 10 to 20 percent more, and sometimes even higher.” In other words, it may pay to hold on to what you’ve got. # # # If you have a question about capital gains and how the tax may impact your real-estate transaction, please do not hesitate to contact one of our attorneys at 212-619-5400. # # #For the latest updates, follow us on Twitter, Facebook, and LinkedIn.
