Is Capital Gains Tax calculated on profit minus selling expenses?
I’m thinking about selling some rentals I’ve never lived in. The gains won’t be that high so I’m considering just selling and paying the gains tax. My question is: is that calculated on the difference between the prices (plus the depreciation recapture) or can I subract out excise tax, fees and commissions? What if I am the agent?
Tags: commissions, depreciation, excise tax
Yes, you can subtract your costs to sell such as transfer taxes, escrow fees and commission to determine your capital gains. Have you considered the recapture of depreciation at 25%?
Do you have to collect a commission? Commissions are ordinary income tax whereas capital gains are a preferential tax item (lower rate of 15%).
If you are interested in deferring the gain, then try a 1031 tax deferred exchange. It seems like a buyers market and there are actually properties out there than have cash flow. There are sydicators out there which will selll you a portion of an investment property to complete your exchange.
For a rental, the profit is computed on the sales price minus your tax basis and costs of sale. This is ordinarily the cost minus depreciation.
Yes you can subtract the sellling costs. If you’re the agent and a commission is paid to your agency and you end up with part of it, then the amount paid can still be deducted, but the amount you receive would of course be taxable income to you