Understand Capital Gains Tax On Home Sale – What You Need to KnowMay 6, 2023
Filing tax returns is highly essential in every state. Besides income tax, there are other taxes you can file for such as capital gains tax on property sale. When you sell a home or property, and make a huge profit exceeding the set threshold, you need to pay tax. However, there are many other requirements that need to be met to either pay reduced tax or avoid capital gain tax at all. To learn more about capital gain tax on home sale, read on.
What is capital gain tax on home sale?
Capital gain tax is the tax assessed on positive difference between the sale price and original price of a home or asset. In short, it is the tax calculated on profit got after selling a home. However, there are so many factors such how long you have stayed in the house, why are you selling the house, and more that need to be considered. But you can avoid or reduce capital gain tax on home sale by meeting some requirements.
How can you avoid or reduce capital gain tax on home sale?
There are different ways you can use to avoid capital gain tax. One of the ways is using primary residence exclusion. If you don’t gain more than $250,000 (500,000 for married couple), you will not be eligible to pay capital gain tax. However, if your capital gains exceed this amount, you will have to comply with the tax authorities by paying the tax.
There are other ways that can help you avoid capital gains tax on home sale. You can try renovating your house and selling it. This is a smart way of getting a better price for your home and avoiding tax on the gains through primary residence exclusion. Also, you need to stay in the home for at least two years before you consider selling it
Partial exclusion not that bad
If you can’t meet the set standards to avoid capital gain tax when selling your home, partial exclusion is a nice option for you. It can help you get some tax break and enjoy more of your profits from selling your home. You can sell the home because of special conditions which will make you eligible for prorated tax-free gain. It’s better to pay a reduced tax instead of paying the whole tax from your capital gain after selling your home.
An easy way to file taxes for capital gain
You need help when it comes to filing taxes for capital gain from home sale. The best and easy way is to try online tax filing method which can help you claim the capital gains deductions you qualify for after selling a home. At H&R Block, you can file for capital gains tax in simple steps. That way you will enjoy tax breaks through accurate tax filing procedures.
The above information will help you avoid capital gain tax on home sales. In addition to that, the information will help you know how you can enjoy partial exclusions and even claim the capital gain deductions you qualify for.