Hi, today I would like to talk about capital gain in Real Estate, but first I would like to disclose that I am not a tax accountant or license accountant, you will need to consult your Cpa for tax law.
For the real estate capital gain tax, I would categorize into two types of real estate, one is residential real estate, the other one is investment real estate.
Let's take a look at residential real estate capital gain, when you sell your property, and you make money on it, there is always a capital gain tax, however, the government has given an individual exemption of $250K and a married couple exemption will be $500k. For example, if you purchase your property at $250k and you sell it for $750k as an individual, you are exempt for $250k then you will entitle to $250k capital gain minus major renovation expenses and all related service fees such as commission for selling houses. On the other hand, as a married couple, you have $500k capital gain exemption, so in this case, the $500k will be completely exempt since married couples do have $500k capital gain exemption. But in order to qualify for this exemption, you will have to occupy there for 2 years as a primary residence in the past recent 5 years. Otherwise, you will not be exempt from that.
Secondly, if the property is an investment property, you will not be entitled to single or married couple capital gain exemption. But you can utilize 1031 exchange to deferred tax with like-kind property to avoid paying capital gain during that year. One thing very important is you will have to identify the property within 45 days after the escrow is closed. 1031 exchange is a very popular method for investors to avoid capital gain and defer their capital gain. However, this will be another big topic, I will talk about that in the next couple videos.
