Law Offices of Connie Yi, PC - estate planning
Tell Us About Your Case

For the safety of our community, clients and staff, we have suspended all in-person meeting effective March 17, 2020. All consultation meetings will be via Phone or Zoom Video Conferencing. Please contact us at 925-484-0888 or email us directly at [email protected] to schedule the consultation.

Bay Area Estate And Tax Planning Law Firm
Estate Planning
Trust Administration and probate

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

| Jul 29, 2014 | Capital Gains Tax |

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

Archives

FindLaw Network

Recent Blog Post

Even a fortune can disappear without sound estate planning

Some figures baffle.Like the speed of light. Like the age and size of the universe. And like estimates pegging the personal fortunes of America's richest families.Consider this imagery relevant to the storied Vanderbilt family for a moment: a pile of money equaling...

Remarrying couples unquestionably need to focus on estate planning

Many remarrying California individuals fail to timely consider and update existing estate plans to reflect new realities.Don't be one of them. Many remarrying California individuals fail to timely consider and update existing estate plans to reflect new...

View More Blog Posts