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| *Ostroff, Fair and Company>>>Renting & Real Estate |
How much tax do I have to pay? |
Ok, here's the deal. I live in Colorado, I just sold my house for $126,000. I only owed $68,000, so as you can see I made a profit. How much tax do I have to pay? I have owned the home since 2000 lived there for a couple of years and then used it as a rental. My agent is telling me that I have to pay 30% of my profit to taxes and that seems a little high. Can anyone help me. I have searched all over the internet and can't find an answer. Thanks Here's your mistake. You turned it into a rental. Internal Revenue Code Section 121 says you can exclude tax free up to $500,000 in NET PROFITS and $250,000 in NET PROFITS if you lived there 2 out of the previous 5 years. Looks like you'll have to pay long term capital gains on your profit. 15%. Call any CPA. They should be able to tell you. Thank your lucky stars the long term capital gains tax has not gone up. 15% is the lowest it has been in many, many years. Agree with Terry, in that you screwed up by using it as a rental, You have to use it as your primary dwelling up to two (2) years prior to selling it or you have to pay capital gains tax. If you would have lived in it you would have been allowed to deduct $250,000 for a single person, or $500,000 if there was a joint ownership or husband wife on the deed. Since you did not occupy it prior to the sale, you now owe the 30% I concur with the first two answers, but must add that what you owed on the house is not part of the equation. The profit is what you sold it for minus what you paid for it, minus documented expenses to fix it up. That is, unless you depreciated it while it was a rental property and lowered the cost basis. Most likely you owe taxes on a smaller amount than you previously thought. Good luck! |
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