Don't let Capital Gains Tax Eat up your Profits!

Hii this is Merrill Jencks with the Big Helper Real Estate Group and today I want to talk to you about a really important topic and it's probably one that you maybe haven't spent very much time thinking about or even realize that it exists and it is capital gains tax as it relates to real estate.  Okay, there's other capital gains tax that you can you know have with the stock market and other things like that but today I'm focusing specifically on real estate.

Now, if you own your primary residence and this is where a lot of people get really hung up actually I should probably and say I am not an accountant and this is not taxed advice however I deal with people all the time who are you know potentially going to need to pay capital gains tax and I can kind of tell them of the basics of what the rules are and then advise them to talk to an accountant.

So, in today's video, I just want to talk to you about some of those basic principles so if you own a primary residence and you eventually sell that primary residence as long as it was yours for at least two out of the last five years then you can have a gain of up to 250 000 as an individual that is not taxable by you know in a capital gains standpoint and if you're married you can have a gain of up to 500 000 that is not taxable now I get a lot of people who are very very confused about how that capital gain is calculated and just a kind of really basic breakdown it has nothing to do with how much you owe on the house and what your mortgage is what it has to do with is how much profit did you make between the sales price and the purchase price and you know if you had a big gain you can also subtract your closing costs when you bought it the closing costs when you sell it and improvements that you made to the house so if you put in a pool and you spend 50 000 on that you can subtract that from your gain so here's a basic example let's just make it really simple pretend like you don't have any fees that wrapped up into this you buy a house for 500 000 and however many years later you sell it for a million dollars okay and let's just pretend that you didn't do any improvements to it and you didn't have any closing costs when you bought it or sold it then that's  a 500 000 game now if you are a single person in that situation and it was your primary residence 250 000 of that is not going to be taxed with a capital gains tax but 250 000 of it is and if you're married you have that 500 000 gain and you don't have to pay capital gains tax on any of that once your gain exceeds those numbers now suddenly that the amount above those numbers you are going.