Capital gain tax is the tax that the government charges when you make a profit from selling your real estate.
Capital gain is essentially profit you made on the sale of your property. It is the difference between the price you initially bought the property and its sale price minus some expenses. And the federal government, and most state government, will tax you. The tax rate will be less if you have owned your property for more than 12 months.
You can reduce your capital gains by factoring in your expenses. There are three types of expenses.
A 1031 Exchange is essentially you swapping a property for another property within a 6-months period. You do not need to pay capital gains tax if the equity in your new property is at least as much as in the property you just sold.
To take advantage of the 1031 Exchange, you must contact a real estate law firm. And within 45 days of the sale, you will need to file with the law firm a list of properties you want to swap with. And at the 6months mark, you must buy a new property; otherwise, you will owe capital gains tax.
For certain activities such as doing a 1031 Exchange, the law requires you to use a real estate lawyer. Even so, a real estate lawyer can determine what proper exemptions to apply to reduce your capital gains tax.
Last Modified: 10-02-2017 09:16 PM PDTLaw Library Disclaimer
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