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Guys welcome back im jeff smith coldwell banker residential brokerage here in huntington beach beach california and today im addressing the question of are there property taxes. When sell a property and so it all depends on what type of property. Youre selling and how much equity.
Youve gained in a certain period of time. Whether or not youre going to pay taxes on that property when you sell it so im gonna give a couple of examples to help guide you through this process and hopefully make it a little bit easier so you know for topic of conversation for the video. Were gonna have your primary residence and were gonna have an investment property right so were gonna talk about an investment property first because its a little easier to address so when selling an investment property.
If you sell that property and you have a gain on it there are essentially capital gains. Youll pay on the on the equity that youve gained in that property. Unless of course that you do a 1031 tax exchange.
Where you take that gain that equity that youve made on that property and roll it into a nother property of higher value of like kind etc. So ill link to what a 1031 is below to give you better guidance on a 1031 to help you know kind of guide you through that process. If youre not familiar with it but with 1031 youre more likely to pay tax on it if youre not rolling it into something else then you are say a primary residence.
So for now. Were gonna talk about primary residences and a primary residence for topic.
You know again for this video. Were gonna say is something that youve lived in two of the last five years. So.
If youve lived in a property. Two of the last five years. Its been your primary residence for that period of time then in the state of california you have a capital gain exemption.
When you sell that property and so and ill link to a capital gain video again below to give you more information on what capital gains are if youre not familiar with capital gains. But to help guide you through that process as well but for you know for a primary residence. If youre an individual and youve lived in that property.
Two of the last five years and were going to assume that you havent sold another primary residence within the last two years because if youve sold a property within the last two years. Then essentially if you go to sell another primary residence. There could be potential tax consequences associated with that but if youve lived in this property.
You havent sold one in the last two years and this is your primary residence as an individual you have up to 250000. That is tax free its a exemption on capital gains that you cant be taxed on that.
250 and if youre married that goes up to. 500000 so you have up to 500000. That is tax free on the on the b cell of your.
Property. So an example would be if you brought a property for. Say 400000.
And lets say now. Its worth a million bucks. Youve lived there for for two of the last five years.
When you go to sell that property and lets assume youre. Married youre gonna have 500000. That is tax free.
So you bought it for 400 you sell it for say a. Million so that 400 to.
900 is 500000. In gain that you can walk away tax free that additional hundred thousand is there theres some potential tax consequences there right. But keep in mind you can write off realtor commissions.
You can write off theres certain expenses that you can write off home improvements that youve done to the property those are things that you can write off when selling that property so out of that additional hundred thousand that you have there there may be less than that that youll actually write off based on the things that i just mentioned now keep in mind. Im not a tax accountant. As you probably know im not a cpa by any means so if youre going to sell your property.
You have tax questions. Consult a professional in that field because they can guide you through the process. Theyll be a better you know therell be a someone better to talk to with regards to your tax questions and really give you the guidance that you need versus say a real estate agent just kind of talking off the cuff about the subject.
So dont rely on my information. Consult a tax accountant. If you are considering selling your property.
And you have tax questions. So you know that i hope that is helpful in in in kind of giving you the difference in the two and telling you whether or not there are actually tax consequences.
Because its not as cut and dry as just saying. Hey yes. There are or no there arent i would say in the majority of cases where its your primary residence.
You know at least in my experience. There are less taxes associated with that sell then say with an investment property. When you go to sell that property now keeping mind.
If you have an investment property. And its been an investment property. If you move into that investment property to for you know for two years.
Then you can actually say thats your primary residence. And then that could be a sell of a primary residence and you could get that capital gain exemption. So there are ways to kind of work around there when you have an investment property and so on and so forth.
But you know if you have additional questions about selling a property taxes you know 1031 tax exchange is capital gains any of that stuff do me a favor comment below would love to address them as always i appreciate you taking the time to watch. And well see you again soon have a great day bye bye. .
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