Law Offices of Connie Yi, PC
California
Estate Planning
& Tax Law
Toll Free: 888-312-6978
Website Navigation Menu

Do I have to worry about capital gains taxes when I sell my home?

A house is more than a home: It is an investment. Chances are good that the value of the home will change from the time you purchase it to the time you sell it. California's foreclosure crisis aside, most of us believe that the value will go up so we can make a profit. When you sell a capital asset like a house, you realize a capital gain or a capital loss.

The IRS defines a capital gain as "the excess of the amount realized over the adjusted basis of the property." If that doesn't make sense, don't worry. Just remember that the tax code does not like absolute numbers; it prefers to factor in other expenses and offsets that would reduce or increase the final dollar amount.

The amount realized, then, is the sale price minus expenses related to the sale. Those expenses can include commissions, legal fees and the like.

The IRS defines the adjusted basis as the basis plus or minus any adjustments. The general rule is that the basis is the price you paid for the home, whether you purchased it or built it. If you inherited the home, the basis is the fair market value on the date you received the home; in some instances, the basis can be the adjusted basis of the previous owner.

Adjustments are what you have put into the house to increase the value or things that have happened to the house that decrease the value. An addition to the home or a garage built to replace one lost in a wildfire -- these are adjustments that increase the value because they have a "useful life" of more than a year. They stay with the home and increase its value over time. Mowing the lawn is not an adjustment.

Adjustments that decrease the value are a little more complicated, so we will put that discussion off until our next post.

Source: Internal Revenue Service, "Publication 523: Selling Your Home"

No Comments

Leave a comment
Comment Information

Contact Us Now to begin your initial consultation

Bold labels are required.

Contact Information
disclaimer.

The use of the Internet or this form for communication with the firm or any individual member of the firm does not establish an attorney-client relationship. Confidential or time-sensitive information should not be sent through this form.

close

Privacy Policy

FindLaw Network

Office Locations

Law Offices of Connie Yi, PC
490 Post Street, Suite 508
San Francisco, CA 94102
Phone: 415-433-3350
Toll Free: 888-312-6978
Map and Directions

Additional Office Locations:
Pleasanton
323 Ray Street
Pleasanton, CA 94566
Phone: 925-484-0888 
Pleasanton Law Office Map

San Mateo
1900 S. Norfolk Street, Suite 350
San Mateo, CA 94403
Phone: 415-433-3350
Map and Directions

Sunnyvale
1250 Oakmead Pkwy, Suite 210 
Sunnyvale, CA 94085 
Phone: 888-312-6978 
Map and Directions