Coldwell Banker Real Estate Now · (731) 668-1777 · Each office is independently owned and operated.

Understanding Capital Gains In Real Estate

When you sell a stock, you owe taxes on your gain -- the difference between what you paid for the stock and what you sold it for. The same is true with selling a home (or a second home), but there are some special considerations.

How to Calculate Gain

In real estate, capital gains are based not on what you paid for the home, but on its adjusted cost basis. To calculate this:

  1. Take the purchase price of the home: This is the sale price, not the amount of money you actually contributed at closing.
  2. Add adjustments:

    Cost of the purchase -- including transfer fees, attorney fees, inspections, but not points you paid on your mortgage.


    Cost of sale -- including inspections, attorney's fee, real estate commission, and money you spent to fix up your home just prior to sale.


    Cost of improvements -- including room additions, deck, etc. Note here that improvements do not include repairing or replacing something already there, such as putting on a new roof or buying a new furnace.
  3. The total of this is the adjusted cost basis of your home.
  4. Subtract this adjusted cost basis from the amount you sell your home for. This is your capital gain.

 

A Special Real Estate Exemption for Capital Gains

Since 1997, up to $250,000 in capital gains ($500,000 for a married couple) on the sale of a home is exempt from taxation if you meet the following criteria:

Also note that as of 2003, you also may qualify for this exemption if you meet what the IRS calls "unforeseen circumstances," such as job loss, divorce, or family medical emergency.

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Pam Blasingame is a Realtor® with Coldwell Banker Real Estate Now, 327 North Parkway, Jackson TN 38305, (731) 668-1777.

The data relating to real estate for sale on this website comes in part from the IDX Program of the Central West Tennessee Association of Realtors® Multiple Listing Service. Copyright 2015 MLSCWTAR. All Rights Reserved. IDX information is provided exclusively for consumers' personal, non-commercial use and may not be used for any purpose other than to identify prospective properties consumers may be interested in purchasing.

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Pam Blasingame - Jackson TN Realtor® - Coldwell Banker Real Estate Now