Here’s how much in taxes you will pay when you sell your home…
When you sell your home there are taxes and fees. Taxes can be the biggest expense. There are taxes on Capital Gains and they can be 0% all the way up to 20%. Always talk to an accountant for specifics on your situation.
Think of the government as our silent partner. When you own certain types of assets like Real Estate, when you make a profit (gain) they want a piece of the action.
Let’s say you own a property that has been depreciated to $0. This property is worth $500,000. When you sell that is a $500,000 gain. Depending on a number of factors (talk to an accountant), there could be a $100,000 tax bill.
How can you avoid paying capital gains tax?
If you live in a home as a primary residence for 2 of the last 5 years. If you are single you are exempt up to $250,000. If you are married, $500,000.
Example: You bought your Wenatchee home in 2015 for $250,000. It is now worth $425,000. That is $175,000 in gain. But, since you have lived there the entire time you won’t have to pay taxes.
If you decide to keep the home as a rental. If you don’t live there anymore after 3 years you will lose this exemption.
There is another way to avoid capital gains and that is with a 1031 exchange. This is more complicated so, reach out to me to learn more about how it works.
I checked the MLS today and there are 37 homes on the market in Wenatchee. Inventory is low and the price is a function of supply and demand.
I’m recommending to our clients not to wait until the Spring market and to be prepared to list during the holidays.
Find out what your home would sell for during the holidays. Remember you won’t close until 2021. We can also guide you to find out what type of tax burden you may have and help you avoid it with the help of accountants.
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Nick McLean Real Estate Group
PS. In the future, the Biden Administration has been rumored to want to change the capital gain tax rules. Based on our opinion that will result in higher taxes when you sell.