4 Part Series on what to keep in mind when preparing for Tax season
Part 3: Sellers
"Protect Your Investment”
Here are some things Sellers should be aware of concerning taxes and Real Estate.
Capital Gains: refer to the profit you make when you sell something (like stocks, real estate, or other investments) for more than what you paid for it. It's the difference between the selling price and the original purchase price. If you sell for a higher price, you have a capital gain; if you sell for a lower price, it's a capital loss. Capital gains are subject to taxation, meaning you may need to pay taxes on the profit you've made.
1031 Exchange: If you plan to buy another property, a 1031 exchange can help defer capital gains tax.
Reporting: You'll need to report the sale on your tax return using IRS Form 1040 and possibly other forms.
Timing: Consider when to sell, especially if you're close to meeting the two-year ownership requirement for tax exclusions.
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