Real Estate Capital Gains for your Monterey Property - How to Understand it

If you sell any stocks, you will owe taxes on any gain—this is the difference between what you paid for the stock and the selling pricer. This also applies with selling your home or a vacation home, but there are things to take into consideration.

Calculating Gain

For real estate, your capital gains are based on adjusted cost basis - not on the dollar amount you paid for your house. If you wnat to calculate -

1. Start with the price you paid for your home: The selling price, not the dollar amount you actually put in at closing.

2. Add your adjustments:

1. Cost of purchase—including , legal fees, home inspection costs, transfer fees. This would not include points you paid when you obtained your mortgage.

• Cost of sale: This includes home inspections, legal fees, commissions for real estate, and dollar amount you spent to fix up your house right before the sale.
• Improvement Costs —such as rooms added, decks, fences, etc. Please note repairing or replacing things like a roof or replacing a furnace when it is already there are not included.

3. This total is the adjusted cost basis for your house.

4.The adjusted cost basis should be subtracted from the dollar amount you sell your house sells for. This is your capital gain.

Real Estate Has a Special Exemption for Any Capital Gains

From 1997 on, $250,000 in capital gains ( married couples have $500,000) on the sale of your house - it is exempt from taxation if you can meet the following requirements:

• You must have resided in the home for two out of the last five years as your principal residence.
• You can not have sold or exchanged another home for the two years before the sale.

Note that from 2003, you could also may qualify for this exemption if you meet what the Internal Revenue Service calls “unforeseable circumstances. this would be things like,” losing your job , getting divorced, or family emergency for medical reasons..