Understanding Capital Gains In Real Estate

When you sell a stock, you owe taxes on your gain -- the difference between what you paid for the stock and what you sold it for. The same is true with selling a home (or a second home), but there are some special considerations.

How to Calculate Gain

In real estate, capital gains are based not on what you paid for the home, but on its adjusted cost basis. To calculate this:

Take the purchase price of the home: This is the sale price, not the amount of money you actually contributed at closing.
Add adjustments:

Cost of the purchase -- including transfer fees, attorney fees, inspections, but not points you paid on your mortgage.

Cost of sale -- including inspections, attorney's fee, real estate commission, and money you spent to fix up your home just prior to sale.

Cost of improvements -- including room additions, deck, etc. Note here that improvements do not include repairing or replacing something already there, such as putting on a new roof or buying a new furnace.
The total of this is the adjusted cost basis of your home.
Subtract this adjusted cost basis from the amount you sell your home for. This is your capital gain.

A Special Real Estate Exemption for Capital Gains

Since 1997, up to $250,000 in capital gains ($500,000 for a married couple) on the sale of a home is exempt from taxation if you meet the following criteria:

You have lived in the home as your principal residence for two out of the last five years.
You have not sold or exchanged another home during the two years preceding the sale.

Also note that as of 2003, you also may qualify for this exemption if you meet what the IRS calls "unforeseen circumstances," such as job loss, divorce, or family medical emergency.

Reprinted from REALTOR® Magazine Online by permission of the NATIONAL ASSOCIATION OF REALTORS®
© 2005. All rights reserved.www.REALTOR.org/realtormag

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CONTACT TONY

200-B Stonebridge Blvd, Jackson, TN 38305
Cell: (731) 298-1064
Office: (731) 664-2373
Business: (731) 668-7500
Toll Free: (877) 668-3686
Fax: (731) 664-8622
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MORTGAGE RATES

Fixed Mortgage Rates Hit Record Lows Again

30-year fixed-rate mortgage (FRM) averaged 3.79 percent with an average 0.7 point for the week ending May 17, 2012, down from last week when it averaged 3.83 percent. Last year at this time, the 30-year FRM averaged 4.61 percent.

15-year FRM this week averaged 3.04 percent with an average 0.7 point, down from last week when it averaged 3.05 percent. A year ago at this time, the 15-year FRM averaged 3.80 percent.

Source: Freddie Mac

The data relating to real estate for sale on this website comes in part from the IDX Program of the Central West Tennessee Association of Realtors® Multiple Listing Service (MLS) Multiple Listing Service. Copyright 2011 MLSCWTAR. All Right Reserved.

IDX information is provided exclusively for consumers' personal, non-commercial use and may not be used for any purpose other than to identify prospective properties consumers may be interested in purchasing.

Tony Neihoff is a Realtor® with RE/MAX Realty Source, 200-B Stonebridge Blvd, Jackson TN 38305, (731) 668-7500. RE/MAX Realty Source is licensed in the State of Tennessee. RE/MAX Realty Source is a registered trademark licensed to RE/MAX Realty Source. Each RE/MAX Realty Source office is independently owned and operated.

The accuracy of all information, regardless of source, including but not limited to square footages, lot sizes, or school districts, is deemed reliable but is not guaranteed and should be independently verified through personal inspection and/or with the appropriate professionals. The information contained within this website is provided solely for informational purposes and does not constitute an offer to sell, rent, or advertise real estate outside the State of Tennessee. The owner is not making any warranties or representations concerning any of the properties listed including their availability.

If you are NOT represented by a real estate agent or broker, I would love the opportunity to help you with your real estate services. Please contact me regarding ANY of the properties listed on this website. If you ARE represented by a real estate agent or broker, please contact them regarding any property you locate on this website. It is not my intention to solicit offerings from other agents or brokers.

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