How Do I Figure Capital Gains Tax on Real Estate?
In real estate, capital gains are the difference between the purchase price of your real estate and the price you sell it for. Capital gains tax is what you pay on that difference, after adjusting for a variety of exemptions, deductions and tax breaks. The tax on capital gains income is calculated separately from the tax on your regular income and often at a different rate. In addition to federal capital gains taxes, most states, including New York (Fed and State combined is 31.5%), tax the gains too. 1 ) Take the purchase price of your property and add the cost of any improvements, "Realty Times" advises. If you bought a rental home for $300,000, for instance, that would be the basis for calculating your gains. If you later spent $30,000 on capital improvements -- a new roof and a kitchen remodel, for instance -- then your basis goes up to $330,000. This applies only to substantial improvements that add to the home's value, not to repairs. Fixing a leaky shower isn