Don't Sell Your Income or Investment Property Until You Do the Math

Taxes are paid on capital gain, not equity or profit. It is possible to sell property without realizing much profit and still owe substantial capital gains tax. Capital gain is simply the difference between the sales price and the adjusted basis (i.e., what you paid for the property, plus amounts spent on capital improvements, less depreciation taken), less any closing costs associated with the sale.

To calculate your estimated capital gain: First, subtract the adjusted basis from the sales price. Next, subtract the customary closing costs of your transaction, such as commission, fees, transfer tax, etc. Finally, multiply the capital gain by your combined tax rates (federal and state) to determine your estimated capital gain tax.

*If your modified adjusted gross income (MAGI) is equal to or less than the threshold amounts specified in IRC 1411, you will not be subject to the 3.8% tax. If your MAGI is above the specified threshold amounts, you will pay 3.8% tax on either your investment income or the excess MAGI over the specified threshold, whichever amount is less.

The formula set forth above is provided to help you determine your approximate gain and the sums that you may wish to defer through your exchange transaction. Consult with your tax advisor to determine the correct values and whether an exchange is appropriate for your circumstances. Old Republic Exchange does not provide tax or legal advice.

To Do The Math, Visit Old Republic Exchange's Capital Gains Calculator: Calculators > Capital Gains Calculator (oldrepublicexchange.com)

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As a Qualified Intermediary, Old Republic Exchange, its officers and employees do not provide, and this communication is not intended to be, tax or legal advice. Old Republic Exchange makes no representations or warranties regarding the tax consequences of your transaction. You should consult a tax or legal professional of your choosing to advise you of the benefits and risks of your specific transaction.