Q:

How do you estimate capital gains taxes on real estate?

A:

Quick Answer

To estimate capital gains on the sale of real estate, calculate the difference between the purchase price and sale price of the asset, notes About.com. In addition, determine the holding period of the property.

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Full Answer

As of February 2015, capital assets are eligible for more favorable rates upon sale if certain criteria are met, notes the Internal Revenue Service. Real estate is a capital asset; therefore, this property is subject to the more favorable rate. The amount subject to the gain is the difference between the purchase price and sale price of the property. The capital gains tax rate is applied to this difference to arrive at total capital gains tax. Capital gains rates change periodically and are based on a taxpayer's marginal tax rate, as listed by About.com. Visit the Internal Revenue Service website to find the current rates.

Capital assets must also be owned and held for at least one year in order to be eligible for the capital gains tax rate, as stated by About.com. This requirement is known as the holding period. Any capital assets held for less than a year are taxed at ordinary income rates. All relevant gains related to real estate are reported on Schedule D and Form 8949. If the net total of all capital asset transactions results in a loss, this loss can be carried forward.

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