You may find this information useful and possibly even timely. Above all, take it as an example and a possible inspiration to contact a professional accountant, CPA or attorney.
To determine your gain, you should go through a series of calculations.
An example: You purchased you home for $250,000
You sell it for $700,000
You spent $20,000 in eligible purchases and upgrade expenses (taxes and major improvements and $49,000 in selling expenses (which includes real estate commission, exise taxes, title, escrow, etc. Be sure and check with your accountant for allowable expenses).
Subtract the selling costs, approximately $49,000, from the closed sales price $700,000, giving you a total of $651,000.
Add the cost of your major improvements, in this example I am using $20,000, to the original purchase price of $250,000. This determines the adjusted cost basis. The total in this example is $270,000.
Subtract the adjusted base of $270,000 from the adjusted selling price of $651,000, (which equals $381,000) to determine your capital gain.
Don't forget the other pieces of the puzzle. You must do the same calculations on any home(s) that you owned prior to this transaction.
You should be keeping meticulous records to prove your home's adjusted cost basis for tax purposes. Some information that you will want to keep in a safe place is proof of purchase price, purchase expenses, receipts for home improvements that affect the home's basis and any information used to calculate the adjusted basis of a previous home that you sold.
This can be a complicated process and I advise strongly contacting your accountant or CPA. You will want to keep close tabs on the bottom line so that you can keep your capital gains low, therefore avoiding paying more taxes than you need to or should. Contact your accountant and go over the various scenarios so that you will be prepared and have knowledge of the possible tax consequences.
The above is only a simplified example to help demonstrate the process. In order to determine your actual costs, eligible purchase and upgrade expenses and the current tax laws, you must consult an expert. Tax laws are continually changing and what is true today may not be tomorrow.
If you need an excellent CPA, please let me know and I will provide you with some professional to contact.
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