What Do I Owe the IRS?
How much in Federal Taxes Will You Owe if you Have a Home Loan?
Let's say that you buy a home in California in 2002 for $250,000 and it sells today for $500,000. So what is your profit? If you pay taxes based on a property that's worth $250,000 then your tax basis is $250,000 and you made $250,000 in profit minus deductions regardless of how large your loan is on the property. If you have had your California home value reassessed by the tax assessors and they adjusted the basis so that the value is at $400,000 on your yearly tax bill then your profit would be $100,000 minus deductions for the sale of your California home. If you have a tax basis of $250,000 and a primary loan of $180,000 and a home equity loan of $20,000 for a total loan amount of $200,000 which you owe then your capital gains for federal tax purposes are still considered $250,000 minus deductions by the IRS because the property is assessed at $250,000 and you sold it at $500,000, regardless of how much you owe. However, when you sell your California home you can also deduct from the profit all your closing costs including transaction taxes, real estate commissions, title and escrow fees, moving costs, and any receipts for qualifying home improvements which you kept over the years while you lived in the house. Please see your tax advisor since the rules constantly change on these issues. If you are single you can deduct up to $250,000, and if you are married up to $500,000 profit if the house was your primary residence and you lived in it for two out of the past five years. However, again talk to your tax accountant because the California real estate tax rules change every year.
Please Describe Your Request Below:
 | © John-Robin Middlebrook. Last updated April 2008.
|
|
