Ok, you've decided to sell your main home, or your rental property.
You probably want to know what you will owe Uncle Sam and how
much you can keep.  Is there a way around paying taxes?  These
issues will all be dealt within this section of the site. 

Determining Capital Gain or Loss
The difference between the amount realized and the adjusted
basis of your property is your gain or loss.  You gain is taxable and
a loss can be deductible, depending on the type of property.  The
two property types involving the selling of real estate are:
 

Primary Residence Exclusion
You can avoid paying taxes on the gain from the sale of your
residence.  Under the present rules you can exclude up to
$250,000 of gain on the sale of your principal residence.  The
amount increases to $500,000 if you are married.  If your gain
from the sale of your residence is within the $250,000/$500,000
limit, you don't even have to report the sale on your tax return.

Learn more about the primary residence exclusion here


Starker 1031 Tax-Deferred Exchanges
Certain exchanges of property are not taxable.  This means that
any gain from the exchange is not recognized, and any loss cannot
be deducted.  Your gain or loss will not be recognized until you sell
or dispose of the property you receive. 

A 1031 exchange allows the deferral of capital gains taxes and
recapture of depreciation.  With the 1031, like-kind exchange, you
can sell a piece of property that is highly appreciated and roll over
the gain into another piece of property.  The second piece must be
another piece of business or investment real estate.  You cannot
do a 1031 like-kind exchange on your personal residence. 

Learn more about the 1031 exchange here

Note that you cannot exchange U.S. real estate for foreign real estate
tax free.


Recapture Depreciation
As you are probably aware, depreciation reduces your basis
for figuring a gain or loss on a sale or exchange of your property.
When you sell your property you will be required to recapture the
depreciation at ordinary income tax rates or capital gains, in some
cases.  This is known as depreciation recapture.  Depreciating
real estate can produce a tax write off but when you sell the
property the tax loss will come back to haunt you as a capital gain
on the sale of your property. 

To learn more about Depreciation Recapture, click here.



Home Selling Tips
If you are thinking about selling your home, you probably know that
a house that is visually appealing and in good condition will attract
potential buyers driving down the street.  Here is an example of a
checklist that lets you look at your property through an outsider's
eyes:
 

Are the lawn and shrubs well maintained? Are there cracks in the foundation or walkways? Does the driveway need resurfacing? Are the gutters, chimney, and walls in good condition? Do the window casings, shutters, siding or doors need painting? Are garbage and debris stored out of sight? Are lawn mowers and hoses properly stored? Is the garage door closed?

Click here to leave property selling and return to real
estate owner main