Your House Sale Profits Can Be Eaten Up In Paying Capital Gains Tax


Advertisement

They say there are only two certainties in life - death and taxes. The problem is that unlike death which is an one off event, there are many forms of taxes that one has to pay.

One of the most controversial is Capital Gains Taxes which sneak up on people just when they think they have had a big windfall from the profitable sale of their homes.

Just say you purchased a house several years ago for $525,000 and you are thinking of selling because you have received a sale valuation of $1.5 million. Before you start the celebrations there are a few things to take into consideration. Under tax law the first $250,000 in capital gains is tax exempt, but what about the rest ?

If you get the $1.5 million, you shoot to the top of the tax bracket for income (that’s any income, be it salary or profit from a sale of a house)  which means that if you are filing as an individual, you will be taxed at 39.6 percent which is the common rate for anyone earning over $415,050 in any tax year.  People with income under that amount pay capital gains tax at a 15% rate.

You may be able to avoid the higher capital gains tax, if you claim all the improvements you've made to the house, along with other expenses such as selling costs etc , but overall if you’re not putting all your profit into buying another primary residence, Uncle Sam will want his share.

Best advice:  Before you sign to sell, check things out with your accountant, tax expert, or your bank.


1 of 1


Advertisement


Must Read

Harvard Online Education: What Have They Learned?

Harvard Business School launched HBX, its new online education initiative. Prior to HBX, the trend was for online courses to create a “lean ba...

SCHOOL'S OUT ! Online Degrees the New Alternative.

The online learning environment is continuously evolving, offering a fantastic opportunity to learn and grow. With increasing tuition costs, budget cuts and lim...

All the BEST credit cards, zero interest, rewards, cash back and more!

Although we all know about credit cards – and likely have multiple cards - what might be surprising is that there are a number of different types of credit ca...

10 Ways To Manage High Blood Pressure

High blood pressure is a common medical problem of the modern age. Today, eight out of ten people older than 60 suffer from high blood pleasure, nearly 40% of p...

Student Loans, what you need to know

For millions of people, college is not an option without some sort of financial aid to help pay for the ever-growing, exorbitant cost. Financial aid comes in ma...

Your Homeowners Insurance Premiums May Be Affected By Your Credit ScoreYour Homeowners Insurance Premiums May Be Affected By Your Credit Score

You probably know that the premiums for your homeowners insurance may increase when and if you file some sort of claim. But, what you may not know is that your ...

This Huge Company Is Harnessing Mindfulness In Its Employees

  While some businesses have gyms and cafeterias for their staff, cloud-based software company Salesforce is giving it employees the silent treatment. T...

Are Those In-Office Perks Really That Good?

Having your employer give you a rent subsidy instead of a pay raise may appear to be a pretty good deal on the surface, but it may not be the best thing for...

3 Big Budget Mistakes To Avoid

Budgeting is all well and good when you are trying to get your financial life into order, but many people just can't get the budget to stick. They fall vict...

5 Personal Success Books You Need To Read

[caption id="attachment_93" align="alignnone" width="1698"] Books HD[/caption] One of the easiest ways to succeed in any venture is to have a mentor you can ...

6 Reasons Why You Should Start A Savings Account Today

A recent survey showed that 40% of Americans do not have enough money squirreled away to see them through an emergency as small as an unexpected auto repair. ...

Tumblr Is Tumbling Yahoo’s Purchase Expectations Out The Door

Tumblr is proving not to be the cash cow Yahoo thought it was going to be , hinting it may write off the entire goodwill value it paid to purchase it. In...