When you sell a piece of real estate, you are typically required to pay capital gains taxes on the sale of that property. A 1031 exchange can help you defer these taxes, but many taxpayers first want to know how much they are going to owe in capital gains taxes when they sell property. In this article, we are going to explain how to calculate your capital gains tax when selling real estate.
Calculating Your Capital Gains Taxes
Figuring out your potential capital gains taxes is a good demonstration of the benefits of doing a 1031 exchange because it shows you how much you can save. Here are the basic steps to calculate your capital gains tax:
- Determine your net adjusted basis by adding the capital improvements to the original purchase price and subtracting depreciation.
- Calculate your actual capital gain on the property by taking the property sales price, subtracting the net adjusted basis, and finally subtracting the cost of sale.
- Finally, determine the capital gains tax owed by combining your depreciation recapture, federal, and state taxes.
Capital Gains Tax Calculator
To make things even easier for you, we have developed a simple calculator that you can use to calculate your capital gains taxes.
Minnesota Real Estate Exchange Company
If you are looking for a way to defer your capital gains taxes on the sale of real estate, consider a 1031 exchange. At Commercial Partners Exchange Company, we have been facilitating like-kind exchanges of real property for our clients for decades. We can help you through every step of your 1031 exchange by answering your questions, preparing the requisite 1031 documents, and advising you on the details of your exchange. Contact us today to see if you are a good candidate for a 1031 exchange!
- 1031 Hotline: If you have questions about capital gains taxes and 1031 exchanges, feel free to call me at 612-643-1031.
Defer the tax. Maximize your gain.
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