Real Estate Capital Gains Taxes for Homeowners
If you own a home, you can exclude up to $250,000 in capital gains profits from your capital gains taxes. For married couples, this figure is bumped to $500,000. Given that the median household net worth is only $120,300, this covers a vast majority of the nation's households. You must live in the house at least two years to qualify.Thanks to the Taxpayer Relief Act of 1997, this exclusion on real estate capital gains taxes for homeowners applies to every primary residence you purchase - it is not a once-in-a-lifetime tax break, as was the case with the old rules. That is, you can use your profits from selling your primary residence to spend anyway you want and you won't have to pay a penny to the IRS in many cases if you qualify.
Real Estate Capital Gains Taxes on Investment Properties
When you make an investment in real estate, such as rental houses, apartment buildings, hotels, offices, or storage units, the real estate capital gains tax rates is either 5% or 15% depending upon your income level plus your state taxes, as long as you have held the asset for one year or longer.You can also defer your real estate capital gains taxes by doing what is known as a 1031 tax free exchange. When sell your property, if you pour the money into another investment property of equal or greater value, you can defer those capital gains taxes. One caveat: If you've taken a lot of depreciation against your real estate, you may find that you have a very low tax cost basis, meaning that there are big capital gains built into your holdings.
