Capital Gains Tax and St. Louis Home Selling
For most St. Louis home sellers, selling a St. Louis home for more than what they original paid for it makes them very happy. It means you get to keep the profits, right? Well not quite. Like paying income or sale taxes, you may also have to pay a capital gains tax when you sell your St. Louis home.
So what does this tax mean? Essentially, it’s a duty that is levied on your property and possessions that you sell at a profit. For most things you sell, such as your car, you don’t sell it for more than you paid for it, but with houses, you can actually sell for more than your original price.
Here is what to know about capital gains tax and St. Louis home selling.
What to Know
It’s not always easy to calculate just how much you’ll have to pay in capital gains tax. This number can differ from one St. Louis area to another, while factors like what tax bracket you’re in make a difference as well. What is good to know is that your St. Louis home sale profits can qualify for a number of tax breaks, so you might be able to cancel out any taxes you owe.
How to Avoid Capital Gains Tax
Avoiding this tax is actually fairly simple, and you might do without noticing. Here are a few ways to legally avoid paying this tax:
- Live in your home for two of the last five years as a primary residence
- The total profit from the sale was $250,000 or less if you’re a single or $500,000 or less if you’re couple
Calculating your gains is simple. Take what you paid for your home and subtract it from the price your buyer is going to pay for it. If you find that you’re over the numbers listed above, then there are a few things you can do to bring it down.
You can subtract any renovations or repairs you made to your home. Not all will count, but if you have invoices to track them, then you’ll have a better chance of being able to deduct those numbers.
What to do if You’re an Investor
Even investors can avoid this tax, though it is a bit more difficult. To do so, you need to do what is called a 1031 exchange, which means you can sell the property and immediately buy another one. By doing this, you don’t recognize any actual gain in your income.
This usually only works if you’re going from rental property to rental property, and there will be very strict rules and guidelines to follow. If you aren’t sure about this, talk with your lender or real estate attorney. You want to make sure your move is legal so the IRS doesn’t come knocking on your door later.
Avoiding capital gains tax isn’t so difficult if you take the time to learn about the process. For more information, speak with your accountant or real estate attorney. He or she will be able to give you advice about how to avoid this tax and how to bring your capital gains down if they are high.