Real Estate Capital Gains

Throughout my real estate career of helping clients buy and sell in the Dayton, Ohio area I’ve been asked this a lot, “Do I have to pay capital gains when I sell my real estate?" If it is your primary residence, vs an investment property,  the government cuts you some slack on gains that are taxed, provided your situation falls within a few provisions.  It needs to have been your primary residence for 2 of the last 5 years.  Also, you cannot have purchased it through a 1031 tax deferred exchange.  If you’re not sure what that is, then you didn’t buy it that way.  The 1031 allows you to swap investment properties to defer capital gains.

Let’s say you purchased the home for 200,000 and sell it for 300,000. You profited (have gains of) 100,000.  However, if you are single, you are exempt from paying tax on gains up to 250k. If married filing jointly, you are exempt from paying tax on gains up to 500k. In this example, single or married, you are below the threshold and would not have to pay capital gains. 

Further, you get to reduce your gain by some costs of the sale like the amount of commission you paid, improvements to the property, attorney fees, and inspections. There are some nuances involved but these are the basics. Want to learn more from your friendly neighborhood realtor? Just reach out!