I am a real estate agent and am not qualified to offer tax advice. But of course, as a California Realtor, there are certain general things I should be aware of. When it’s time to sell your home, you certainly want to take advantage of your homeowner’s exemption. It is $250,000 or $500,000 for a couple. I am frequently asked about determining your tax basis.
Every primary residence or rental property has a “Basis.” This is a crucial figure when it comes time to sell. To calculate your profit, first subtract your Basis from the Sales Price. This difference represents your gain. Next, deduct your Selling Costs. These typically include agent commissions, escrow fees, and closing costs. The remaining amount is your net profit from the sale.
Your Basis usually starts with the original purchase price for a primary residence. But it doesn’t stop there. Add the cost of any significant improvements you’ve made over the years—like a kitchen remodel, new roof, or room addition. These upgrades increase your Basis, which can lower your taxable gain. However, calculating Basis can get complicated, especially with long-term ownership or inherited properties. It’s always best to consult your accountant for accurate guidance. They can help ensure your calculations are correct and you maximize your tax benefits.
Every primary residence or rental property has a “Basis”. Subtract the Basis from your Sales Price at the time of sale to calculate your profit. Then deduct your Selling Costs. Generally, for a primary residence, your basis consists of the initial price you paid for the home plus any improvements made.
Please get in touch with your accountant for specific information about determining your tax basis.
Rental basis is similar, except you subtract any depreciation taken. For tax information tailored to your situation, consult an accountant specializing in real estate. If you are thinking of selling and are curious about which fix-its pay off, call me at (818) 790-7325.
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