My husband and I bought a foreclosure in our neighborhood. We fixed it up and plan to sell it for a profit. Can you tell me the amount of capitol gains taxes we will pay? Does the percentage of tax go down if we sell after owning this home for over a year. We paid $26,500 and invested $20,000 to remodel. Hoping to sell for around $80,000 and expecting around a $40,000 profit. Thanks for your help. Any information on capitol gains taxes will be helpful.
Sherry
1 Answer from Attorneys
You are correct in that capital gains are taxed at a lower rate (15%) if you own the property for more than one year. If you hold the property for less than that, the rate will be whatever your taxable rate is on ordinary income.
If you are going to be starting a business of purchasing properties and selling them, you might want to sit down with an accountant or tax attorney and ask them about 1031 exchanges. This is a way of deferring your tax on business properties.
Good luck to you.
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