When you sell a piece of real property at a gain, you will more than likely owe capital gains taxes on the sale. It’s important to get an idea of what this tax burden will be prior to selling your property so you can prepare yourself for the sticker shock (and consider deferring these taxes with a 1031 exchange). In this article, we are going to offer a few tips for calculating your capital gains taxes on your next real estate sale.
Capital Gains Taxes on the Sale of Real Estate
In a nutshell, here’s how to calculate your capital gains taxes on the sale of real estate:
Net Adjusted Basis. First, you need to calculate your net adjusted basis by subtracting depreciation from the original purchase price, then adding capital improvements.
Capital Gain. Next, you need to calculate your capital gain by taking the sales price and subtracting the net adjusted basis. Then take that number and subtract the sale cost.
Capital Gains Tax Burden. Finally, you need to calculate your capital gains tax burden by adding your depreciation recapture and your federal and state taxes.
Use our Capital Gains Tax Calculator
Trying to manually calculate your capital gains taxes can be an arduous task. That’s why we have put together a free tool that you can use to calculate your capital gains taxes quickly and easily. Check out the calculator here:
Decades of Experience with 1031 Exchanges
Exchanging property under section 1031 of the Internal Revenue Code can be a complex ordeal. That’s why it’s a good idea to work with a qualified intermediary who has experience with facilitating exchanges of like-kind property. At CPEC1031, we bring more than two decades of experience to the table. We can prepare all of your documents, answer all of your questions, and make sure you have all of your bases covered. Contact us today at our downtown Minneapolis office to chat with one of our intermediaries about your exchange!
Start Your 1031 Exchange: If you have questions about 1031 exchanges, feel free to call me at 612-643-1031.
Defer the tax. Maximize your gain.
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