Santa Cruz real estate investments can be a goldmine. However, Santa Cruz homes and commercial real estate properties also attract CGTs (capital gains taxes) that eat into your profits. However, owners of Santa Cruz Properties can use some tactics (legal, of course) to minimize or avoid capital gains taxes on real estate altogether so they can keep much of their sale proceeds.

Capital Gains Real Estate Tax?

Are you one of those with homes for sale in Los Gatos, CA, Capitola, Felton, Aptos, Scotts Valley, Soquel, and other locations known for high-value f and across the state? If so, you must be ready for your sale's potentially higher capital gains and tax implications.

Capital gains taxes are primarily Federal Government taxes. To understand capital gains tax when selling a home or an investment property, let's begin by defining capital gains and losses.

Capital gains on selling a home or any other property are a profit from the transaction.
Capital losses are suffered when you sell a property at a loss.
The capital gains tax on real estate investment property is the amount that the Internal Revenue Service (IRS) will levy on a profit you generate when you sell your house, land, or business building for more than you acquired.

Short and Long-term Capital Gains Tax When Selling a House or Commercial Property

The amount of capital gains tax for selling a house or any asset will depend on how long you have owned the property before deciding to sell. The IRS will consider it short-term gains if evaluating capital gains on selling a house you have held for less than one year. If you have held the property for more than a year, the IRS will consider all the gains you make to be long-term gains.

It's vital to distinguish between the two because capital gains rates applicable to long-term and short-term profits differ. If, for example, you have houses for sale, the IRS will tax you at the same rate as any other regular income if you have held these properties for less than a year. You are eligible for reduced rates if you held them for over a year before selling.

How does Capital Gains Tax Work on Real Estate?
When you bought the property (how long you have owned it)
Income bracket
Whether it is a primary residence
Your marital status

CAPITAL GAINS TAX IMPLICATIONS FOR SANTA CRUZ HOMES FOR SALE
Single Filer Status
Married Couple Filing Jointly
Head of Household Status

Assuming you are the family breadwinner, you are exempt from paying capital gains taxes if your income is less than $63,000 in the year you file your taxes. The tax rate for capital gains is 15% on incomes between $63,000 and $551,350, and a 20% capital gains tax rate applies to incomes above $551,350.

CAPITAL GAINS TAXES ON RENTAL PROPERTIES

The IRS applies different tax rules to rental properties regarding capital gains taxes from those applicable to primary residences. If you've previously claimed depreciation on your rental property, you may be subject to a 25% depreciation recapture tax on a portion of your capital gains. The long-term capital gains tax rates for rental properties can vary between 0%, 15%, or 20%, depending on your total earnings and filing status.

Let's consider an example: Suppose you sold a rental property you bought for $250,000 and received $50,000 in proceeds. If your gains from the sale include depreciation expenses claimed as business running expenses, the IRS will require a 25% depreciation recapture tax on that portion of the profit. Depending on your income bracket, they will assess a capital gains tax on the remaining balance at either 0%, 15%, or 20%.

The Obamacare (Affordable Care Act) and Capital Gains Taxes
California Capital Gains Tax: Do not Forget Your State Taxes

The highest federal tax rate for regular income is 37 percent. Capital gains are federally taxed at 20%. The total tax rate rises to 23.8% when you include the Affordable Care Act's 3.8% net investment tax. Thus, Californians with commercial properties or houses for sale are subject to a combined capital gains tax rate of 23.8% plus 13.3%, making it one of the highest in the world.

Can You Limit Your Capital Gains Taxes on Real Estate?
1031 Exchange
Tax-Deferred Funds
Make it Your Primary Residence
Tax-Loss Harvesting
Invest in an Opportunity Zone
Deduct Expenses
Repair costs - Property upgrades and improvements

Read the full blog at: [ Ссылка ]

свернуть