Short & Long Term Capital Gains
A few things to know about capital gains. ..
There are short and long-term capital gains that you can potentially be taxed on.
◽️Short-term capital gains apply to home owners who acquire a property and sell it within one year. Any earnings made through renovations/ flipping the property, or through market value increases would be considered income earnings and therefore be taxed accordingly.
◽️Long-term capital gains are taxed at a lower rate than short-term capital gains and apply to those who own an investment property that earns rental income over a period of a year or longer. These gains are calculated off additional value the home has earned when it comes time to sell. Final sale price less your original purchase price.
There are a few ways to offset capitals gains. 👇🏼
1. Occupy part of the home as your principle residence for at least a two out of five years of owning the home without purchase a new principal residence.
2. Offset the gains with capital losses.
3. Document repairs/ renovations and deduct, and any costs required to improve the selling price of the home.
4. If you turn your current principal residence into a rental, it’s important to note the value of that home per the time of transaction to minimize paying capital gains on any built up equity while it was your principal residence.
There are also some exceptions that may apply short-term capital gains if you are selling due to insolvency , divorce, etc.