When selling a home, you certainly want to make a nice profit. After all, real estate is one of the best investments you can make if you do it right! However, you may realize that there are some tax implications of selling a house when tax season arrives. How much tax do you pay when selling a house?
The team at My Tennessee Home Solution is here to make your tax season a breeze. We buy houses in Nashville, and we can help you understand what to expect when it comes to the taxes on the sale of your home.
What Are Capital Gains Taxes?
Capital gains tax is the tax you are required to pay on the sale of an asset, like a house. If you sell your home for more than you paid for it, that is considered a capital gain. This profit is taxed based on how long you owned the home and your current income.
Why do you need to pay taxes? Failing to pay taxes can have consequences ranging from fees to imprisonment, so doing so properly can help you stay in compliance with the law.
Capital gains tax on home sales can fall into a short-term or long-term tax rate, with the majority of homeowners falling into the long-term tax rate if they have owned the home for over a year. So how much tax do you pay when selling a house?
You can find tax calculators that estimate capital gains tax on your property, but the three main tax rates are 0%, 15%, and 20%.
These factors come into play when calculating capital gains tax on property:
- Your income tax bracket
- Your taxable income from your real estate sale
- Your current marital status
- The number of years you have owned the home
- Whether or not the home was used as a primary residence or not
Tax Benefits of Homeownership
Even though the capital gains tax exists, the good news is that you may not have to pay! There is a tax exemption for the sale of your principal residence, but you have to fall into one of two categories as long as you have lived in the home for at least two of the last five years.
Married couples do not have to pay taxes on the first $500,000 in profits from the sale, and single people are exempt from paying taxes on the first $250,000 in profits. You can also qualify to deduct your mortgage insurance payments from your taxable income as well as any mortgage interest that you have accrued.
Seek Guidance From My Tennessee Home Solution
How much tax do you pay when selling a house? The answer depends on multiple factors that we can help you better understand. Our team is veteran-owned and operated, and we are the only 5-star rated company in Tennessee to buy your home as-is.
We can help you navigate the cost of selling your house while taking the stress off your hands.
Selling a home is easy with My Tennessee Home Solution! Contact us today at 615-933-5431 to sell your home faster.