November 6, 2024
Home Seller
Profits realized when selling an investment property are subject to income taxes by the IRS as income. If your purchase was $400k and sale for $600k, your gain would amount to $200,000. That sum would need to be reported as income for taxation purposes.
As with your primary residence, capital gains on investment properties are not excluded from taxation; all profits are taxed at an applicable tax rate that varies with how long the property has been held for; short-term gains will be taxed at your regular income tax rate while longer-term (0% to 20%) rates could apply if held more than 12 months.
Capital gains tax can be minimized or avoided entirely with four strategies.
One way of deferring capital gains taxes when selling real estate is investing in another similar property and delaying payment until later on.
Tax-loss harvesting is a strategy for lowering your tax bill by using capital losses to offset any gains.
Cling onto your property as long as possible to take advantage of lower capital gains tax rates for long-term assets, which can translate to significant savings when compared with short-term gains rates.
Any depreciation claimed in the past should be "recaptured", and taxed as ordinary income. Take advantage of all deductions available while owning the property to minimize costs.
With expert industry experience as a Corona real estate agent, Diana Renee offers unparalleled insights into the local market. Whether you're exploring Corona homes for sale or seeking guidance on selling your property, trust Diana's expertise to navigate your real estate journey.
Understanding capital gains tax when selling an investment property can save you thousands. Please feel free to reach out with any inquiries about this subject; I am more than happy to assist!
Diana Renee
I am so fortunate to have grown up in one of the most wonderful places in the world, California. With friendly people, incredible weather, great entertainment, beaches, mountains and the desert all within driving distance, SoCal has it all. I was born and raised in Long Beach, and have lived in Corona since 1996. I truly love this city and I'm proud to assist my clients in navigating the process of buying and selling real estate.
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