CalBears96 said:
lovingit said:
Let?s say I sell a $1m property after realtor fees. Let?s say I have $400k left on the loan. Since it?s investment home, there are no exemptions from living there 2 out of the last 5 years. Does that mean I will have to pay 25% * $600k profit = $150k to the IRS? Like I would actually have to write a check for $150k due to this $600k profit?
First of all, the profit is the final proceeds after all realtor fees minus the total cost of the house when you bought it. It has nothing to do with how much you left on your loan.
And the real estate capital tax gains is either 15% or 20%, depending on your tax bracket, if you had owned the house more than one year since it will be considered long-term capital gains.
This is incorrect. I looked at my Final Settlement Statement when I sold my primary house. They took the proceeds from the sale price, minus my principal balance (my loan) and realtor commissions and other escrow and title charges. Nothing on the settlement statement showed the price of what I originally paid for the house. So yeah, you have to subtract out your original loan to pay off what you still owe the bank.
But I have never sold an investment home. I think if you made $500k after all fees, do you have to pay 20% x $500k or $100k as capital gains? That?s a huge check to write.