Houston, TX asked in Tax Law for Texas

Q: If i sell a property to finance a new residence how are taxes applied?

The property i am selling i have owned for 10 years and has appreciated in value.

The property i am selling is not my prime residence.

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1 Lawyer Answer
Anton Pal Montano
Anton Pal Montano
  • Tax Law Lawyer
  • Bellaire, TX
  • Licensed in Texas

A: Thank you for your question. Assuming that your property is not part of real estate "inventory" and that you are not a dealer in real estate, it appears that your property would be subject to a federal capital gains tax if you are able to sell it for a profit or more than your basis in the property. Because you have held the property for more than 1 year, it appears you would be subject to a long term capital gains tax rate. The long-term rate is more favorable than the short term capital gains tax which is at the ordinary income tax rate for the taxpayer.

The long term capital gain tax rate varies depending upon your income. Most people pay around 15 percent, but it can be as low as 0 or up to 20 percent. Also, a special rate might apply for gain on real property for which a taxpayer has taken depreciations in the past. Moreover, the amount of taxable gains may also depend upon whether you had other assets sold that created capital gains or losses, because you would ultimately get taxed on the net capital gain. You may want to consult with a CPA or tax attorney to discuss the details of your transaction.

Please note that my answers are for general educational purposes only and do not establish an attorney-client relationship. You should contact an attorney for specific legal advice regarding your situation.

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