Long Term Capital Gains Tax Rate On Real Estate
Investing in real estate is a popular way of accumulating wealth, and this asset class has shown immense growth over the years. However, when you decide to sell your property, you may be subject to capital gains tax. Capital gains tax is a tax on the profit made from the sale of an asset. In this article, we will discuss the long-term capital gains tax rate on real estate.
What is Capital Gains Tax?
Capital gains tax is a tax that is imposed on the profit you make when you sell an asset. The asset can be anything from a share of a company to a piece of property. The tax is calculated on the profit made from the sale of the asset, not on the total value of the asset. Capital gains tax is divided into two categories; long-term and short-term capital gains tax.
Long-Term Capital Gains Tax
The long-term capital gains tax applies to assets that have been held for more than one year. The tax rate is lower than the short-term capital gains tax rate. The long-term capital gains tax rate on real estate is determined by your income tax bracket.
Long-Term Capital Gains Tax Rate on Real Estate
The long-term capital gains tax rate on real estate is determined by your income tax bracket. For individuals in the 10% and 15% tax bracket, the long-term capital gains tax rate on real estate is 0%. For individuals in the 25%, 28%, 33%, and 35% tax bracket, the long-term capital gains tax rate on real estate is 15%. For individuals in the 39.6% tax bracket, the long-term capital gains tax rate on real estate is 20%.
How to Calculate Long-Term Capital Gains Tax on Real Estate
To calculate the long-term capital gains tax on real estate, you need to know the cost basis of the property, the selling price, and any expenses incurred during the sale. You can subtract the cost basis and expenses from the selling price to get the capital gain. Then, you can multiply the capital gain by the long-term capital gains tax rate to get the tax owed.
Exceptions to Long-Term Capital Gains Tax on Real Estate
There are some exceptions to the long-term capital gains tax on real estate. If you sell your primary residence, you may be eligible for an exclusion of up to $250,000 for individuals and $500,000 for married couples. To be eligible for the exclusion, you must have owned and lived in the property for at least two of the last five years.
Conclusion
Investing in real estate can be a great way to build wealth. However, it is important to understand the tax implications of selling your property. The long-term capital gains tax rate on real estate is determined by your income tax bracket, and there are exceptions for primary residences. Make sure to consult with a tax professional to ensure you are making informed decisions when it comes to selling your property.