When Selling My House, What Taxes Do I Pay?

When you sell a house, a large amount of money exchanges hands. Hopefully, you’re looking at a nice big payday. But when you get your money, the government gets its cut too. So what kinds of taxes are you looking at when you sell a house? We’re going to break it down for you right now.

Capital Gains Taxes

The primary tax concern when selling a house is capital gains. The taxes you will pay depend on a few things, but here’s the basic idea. You are taxed on the profit you make from selling your house, and it’s calculated as a capital gains tax. So depending on your income, your capital gains rate is the one to check.

But taxes are never that simple. There’s a major exemption (or deduction if you prefer) for people who lived in the house they are selling (as opposed to selling a secondary house that was never your primary residence). If you lived in the home for at least two of the five years before the sale (as a primary residence), then you get a deduction of $250,000 when you sell the home (or $500,000 if you are married and filed jointly). So the first $250,000 of profit is not taxed as capital gains. Any amount over that gets the standard capital gains tax.

Also, if you haven’t lived in the home long enough or owned it long enough, you don’t get this deduction.

Calculating Profit

It’s important to understand that the gains tax only applies to profit and not revenue. So this is based on how much the house was worth before it was sold. This is not a moving target based on up-to-date market conditions. Instead, it’s based on the house’s assessed value.

This is a specific term that refers to the value of the home according to the government. In order to calculate property taxes, the government assesses your house and assigns a value to it. That value does not change very often, and it’s the value of your house before the sale (as far as taxes are concerned).

To understand this a little better, let’s look at an example. Let’s say that the assessed value of your house is $100,000. If you sell the house for $100,000 or less, then you made no profit, and there are no capital gains. You won’t owe any such taxes regardless of deductions and such.

Let’s say instead that you sell the house for $110,000. In this case, you made a profit of $10,000. If you qualify for the deduction, you won’t owe any capital gains taxes. In fact, you can sell the home for up to $350,000 in this example and not owe any capital gains taxes.

But if you don’t qualify for the deduction, then when you sell the house for a total of $110,000, you’ll owe taxes on that $10,000 profit (but not the total sale).

Additional Red Tape

While capital gains tax is the big one, there are other fees and costs associated with selling a house, with some of them are instituted by the government. Whether or not you consider them taxes is up to you, but here’s the gist. 

You have to file the title transfer with the county, and that usually costs money. It’s typically covered by title insurance costs, which include more than just filing. In some cases, you may also have to pass an inspection before the house can sell. That’s another fee. Realtors and repairs and showings also add a lot of extra time and costs to the process.

If all of this sounds complicated, there’s an easier way. You can sell to We Buy Houses Cincinnati. We can buy your house for cash, and when we do, we’ll handle all of the closing costs. The only thing you’ll need to think about is the capital gains tax. If you want to sell your house fast and do things the easy way, we’re your best bet. We buy houses around Cincinnati all the time, and we can buy your house too. Give us a call or contact us online.