ALL THE WAY HOME

by Liz Young

Let's Talk About the Capital Gains Tax

As we head towards the end of the year, it’s time to think about taxes. I recently spoke to Nikki Thorton, an accountant with Steven M. Stell Public Accountants in Charlotte about the Capital Gains rule and whether you might need to pay taxes on the profit from your home when you sell it based on how long you have owned your property.? A capital gain occurs when you sell an asset for more than you paid for it.? Given the meteoric rise in property values in the Charlotte area, many homeowners could have a capital gain when they sell their home.

Per Nikki, “The main thing to keep in mind is that you need to own your house for at least two of the last five years to avoid capital gains tax and the house does have to be your primary residence. If you’re single, you are eligible to exclude up to $250,000 of your capital gain and if you’re married and filing jointly, you are eligible to exclude up to $500,000 of your capital gain. You also cannot have made a similar election within the last two years.“

Seeking advice from your CPA or tax professional for extenuating circumstances like getting remarried or being a widower would also be advisable.

Another extenuating circumstance could occur if you need to sell your home to take a job more than 50 miles away from where you currently live.? If this is the case, then you could potentially qualify for a part of the exemption from capital gains even if you have only owned your home for less than 2 years. For example, say you live and work in Atlanta and you take a job that’s 15 miles away from your current residence in Atlanta, you would not qualify for the tax exemption.? However if you are moving from Charlotte to Atlanta for a new job, you could potentially qualify for the exemption.

Also if a homeowner is unemployed, the homeowner may be able to take partial sale on the property and have some tax benefit.? Lastly, if someone in your family gets sick, and it forces you to move, you could possibly qualify for a reduction in the capital gains tax. These are some exemptions to keep in mind. Talk to your CPA for further clarification.

“To calculate your capital gain, you would look at the sales price and then account for improvements and other expenses that can offset that sales price. Keep track of any improvements you’ve done to the property as well because that would be your gain.” - Nikki Thorton

A lot of my clients are asking about this because homes have appreciated so much, so many homeowners are sitting on $50,000, $100,000, or $150,000 in equity and it would be very tempting to take the profits without thinking about tax implications.?

To connect with the Steve Stell firm, give them a call at (704) 631-2000. If you have any real estate questions, reach out to me at (704) 578-9513 or [email protected].?

Subscribe to my YouTube channel for more real estate news!