Suzi Petroff, REALTOR®
One of the HARDEST things I’ve had to learn over the years is Capital Gains. So Here is a simplified summary. An article is attached, and most of my summary came from that article.
Capital Gains is the federal tax paid on the profit part of an investment (home, investments, businesses). If you buy it for $100 and sell it for $125, you pay taxes on the $25.
Some are long term (1yr+). Some are short term (-1yr). Long term rates are lower, so holding assets over a year minimizes taxes. And rates are tiered. The attached article has details on that.
There are Capital Gains exclusions. In housing, if you have owned and lived in your home as your primary residence for at least 2 of the last 5 years preceding the sale, you can exclude $250k for an individual or $500k for a couple. Can you see how the exclusion is very similar to the sweet spot for home sales? Currently, the median home price in the US is $436,800.
States may tax capital gains, and while the above info may seem clear, it becomes confusing when everyone has different state rates and applications. Texas does not have a state income tax or tax capital gains.
Suzi Petroff, REALTOR® 