How is gain from the sale of my home taxed?

Taxpayers can exclude $250,000, or $500,000 for married taxpayers filing a joint income tax return, as gain from the sale of a home. This exclusion can be used only once every two years. The home must have been their principal residence for two of the last five years, or they must have a legally valid reason for owning the home less than two years. Legally valid rreasons can include divorce, job transfers, death of a spouse, or other non-voluntary reasons. Gain in excess of the exclusion amount is taxed as capital gains, with the most normal rate being 15%.

→ Read More

Can I deduct losses on my income tax return?

Losses are deductible up to the amount of “adjusted basis”. However, individuals cannot deduct losses unless they are either: (1) incurred in a trade or business, (2) incurred in a transaction entered into for profit, (3) arising from fire, storm, shipwreck or other casualty, or (4) from theft. Deductible losses do not include losses from the sale of capital assets, like stocks and other investment securities. Those are capital losses to which special rules apply

→ Read More

What is the tax basis on the sale of gifted property?

If the fair market value of the property at the time of the gift to you is less than its adjusted basis, your basis depends on whether you have a gain or a loss when you dispose of the property. Your basis for figuring gain is the same as the donor’s adjusted basis. Your basis for figuring loss is its fair market value when you received the gift. If the fair market value of the property is equal to or greater than your its adjusted basis, your basis is the donor’s adjusted basis at the time you received the gift.

→ Read More

How do you measure gain or loss for tax purposes?

Capital gain is defined as the difference between the cost to purchase the property and the sale price. The initial price paid for the property is known as basis. Cost of improvements to the property can be included when calculating the property’s basis. Any selling expenses can also be deducted from the proceeds of the sale, which reduces the amount of capital gain.

→ Read More

How is the basis of property determined for income tax purposes?

The basis is any property is the cost of the property plus any additions or improvements paid for over the life of the property. There are exceptions to this general rule. Property that is inherited receives a stepped up basis or a stepped down basis to the fair market value of the property as of the date of the decendent’s death. Property that is gifted to someone carries the same basis as that of the donor of the gift, unless the fair market value is lower than the donor’s basis, and in that instance the basis is stepped down to the fair market value.

→ Read More

What are capital gains or losses?

Capital gains or losses are gains or losses from the sale or exchange of capital assets. Capital gains and losses are a very specific concept in tax law, so as with other complex tax issues, it is always best to consult a tax specialist if you are going to report any capital gains or losses on your taxes.

→ Read More