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capital gains tax
I bought a house in 2001 for 75K.I have made improvements to it and can now sell it for about 170K.I owe about 100K after cashing out some money.If I sell it,am I taxed on the sale amount,the increased value or on the profit I made after the improvements?Also,if my intention is to purchase another house with the money from the sale,does that affect anything as far as the tax on the original sale?The house is used as a rental property.
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BE:
You need to get professional tax help. Your rental property has been depreciated over the period of rental, and that depreciation has to be deducted from the basis. The improvements are added to the basis, but the improvements should have been depreciated as well. Here is the kicker: You have to do the depreciation calculation, even if you did not claim the depreciation on your Schedule E to offset rental income. If you want to roll the basis of the old rental house into a new rental house, you must do a 1031 exchange of properties. There are real estate brokers who specialize in this type of property exchange. It must be done exactly right, or the exchange will be invalidated on review by the IRS. Again, get tax professional help!! |
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