What is CAPITAL GAINS Tax on REAL ESTATE?

What are capital gains in Real Estate? In this video, I discuss how capital gains are computed when you sell your property as well as the exemptions that may apply whether you are married or single.

#RealEstate #RealEstateMarket #HousingMarket

Capital Gains Explained

Capital Gains are any profit you make when selling a property whether it be a primary residence or any investment property.

What are Capital Gains Taxes in California?

Long-term capital gains tax is a tax on profits from the sale of an asset held for more than a year. Long-term capital gains tax rates are 0%, 15% or 20% depending on your taxable income and filing status. They are generally lower than short-term capital gains tax rates.

How can I avoid Capital Gains on Real Estate?

There are a few ways, If you sell a primary residence in the state of California you can be exempt from Capital Gains taxes if you live in the property 2 of the last 5 years. There is an exemption of up to $250,000 if you are single or $500,000 for a married couple.

If you sell rental or investment property, you can avoid capital gains and depreciation recapture taxes by rolling the proceeds of your sale into a similar type of investment within 180 days, this is called a 1031 Tax Exchange after the tax code.

Example of Capital Gains

Let's say you purchase a home for $500,000 as a primary residence and live in it 2 of the last 5 years. Then you sell the home for $1,000,000. That leaves you $500,000 in profit from the home (minus real estate commissions, etc.....). If you are married then you wouldn't have any taxable income because of the $500,000 exemption but as a single person you could have up to $250,000 in taxable income (the first $250,000 of profit is exempt while the additional $250,000 could be taxable). Keep in mind that any improvements to the home as well as real estate commissions can also be added to your cost basis and would be exempt for capital gains tax.

As I mention in the video, I'm not an accountant and don't pretend to be so if you have tax related questions, you should consult with a professional. This is not advice.

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[kahaliyilma]

Thank you Jeb for the real life Examples, they really helped break down everything and helped me understand better!!

[Alessandro]

Thanks Jeb. I appreciate you taking the time to explain this valuable information.!

[rosecoloredhealing]

Loved the way you explained this. Thanks

[NestorPulido]

Great info man now I know what I need to do when I decided to sell my duplex.

[MybabyloveJR]

Thank you for this! Short sweet and to the point

[jamiestumps]

Hello Jen, Thank you so much for the video, so clarifying!

[FlipWithRick]

Hey Jeb Liked and Subbed for more of that great content. I love seeing those great little nuggets.

[swhite]

Thank you for this extremely valuable information.

[satkaru]

Thank You. So if my gain is 500K after all expenses, my total tax will be 15%(Fed)+13.3%(CA) = .283 * 500k = 142k. Is that calculation right?

[DCS-lmyq]

How about capital gains in Florida on second homes?

[tedzagami]

Hi..., I am in Pheonix, AZ. Do capital gain tax apply to mobile homes...? I bought the MH 4yrs ago and have been paying the taxes on it, the thing is... That I had a problem getting the title transferred to me for the longest time. I FINALLY got the title transferred 6 months ago and now I'm selling the MH at a nice profit. The land is leased at $600, and I was a private buyer that bought from a private seller... I already bought another home in FL. 4 months ago and plan on moving there when this is sold... Can the Capital G tax (if any) be deferred to the new home...??? I am unemployed. 56yrs old. And these are primary residents for me... It does show on the community lease that I have been here since 2017, but the tax office has the previous owner on their records paying the taxes up until 2021... Am I screwed...😣
WORRIED...😓

[nekeshasullivan]

Thank you this was helpful. What about capital gains on a multi family property which the owner was occupying one unit and would like to sell to purchase a single family. How would the capital gains work in that scenario? Thank you!

[lisacmoran]

Can you save money on the capital gains taxes if you purchase another home and if so, what is the time frame to do so? Thank you so much!

[harrykoujaian]

Thank you for the video. A scenario if I may. My father and I have a house in California. My primary residence is in Illinois and his obviously is in California. He passed away in May and the house deed was transferred solely to me. The house is currently in escrow. It was purchased in 1987 for 120, 000 and sold for So the gain is 380, 000. I am trying to figure out what the capital gains tax would be. Since my dad lived there since 1987 and I did not, would I just be liable to pay capital gain taxes for 190000 (380000/2). Thanx

[jonnytee]

Hi Jeb. Thank you. This video was helpful. I’m not sure if you will see this remark. But I’d like to run my scenario by you and ask your opinion on which side I would fall on.

In 2007 I purchased a home as an investment property. From day 1 my parents were renting the home from me. In 2010 I moved into the home with them and it became my primary residence until 2015. In 2015 they stayed in the home and I moved out. Now (in 2021) I am moving back into the home for a year or two. At that time I plan to sell the home.

So my dilemma is, when I go to list and sell this home, does it fall into the investment property or primary residence category?

[rajagillification]

At what rate will the federal tax and state taxes will be assessed?

[kimla]

Question. I purchase my home back in 1998 for $110K n now sold for $285K. I’m single n live over 20 years ago. Do i exempt capital gain for single 250K?? Please respond. Also my primary home

[ads]

Just want you to add that you didn't mention capital gains on investment properties has to be for rental properties only. It can not be used towards flipping houses.👌

[brianflood]

And what is the rate in California after $500, 000 gain?

[chita]

If I gift a rental which is in my LLC. that I inherited years ago to my daughter at a base of about $ 100.000 when I inherited it. now at the time of the gift it's worth $500.000. She lives in the house for two years and then sells it for $500.000 does she have capital gains?