What Are Capital Gains for Selling a House in California?

When preparing to sell a home, many individuals do not consider the capital gains tax that is associated with this process. When selling at a profit, the amount of money earned is taxed. If selling your home, you will most likely want to understand the capital gains tax rates and how they apply to selling real estate in California. In doing so, you can gain a better understanding of whether selling your home makes financial sense.

What Are Capital Gains?

In the real estate market, when you sell a home, capital gains is the term for the additional money made after selling that is taxed. This tax is computed by taking the selling price of your home and subtracting any costs incurred in the selling process. The adjusted basis is essentially how much you originally paid for the property and includes factors such as legal fees, title transfers, and a few more minor nuances.

How Can I Prepare for This Expense?

Typically, most mortgage lenders keep a certain percentage of money in escrow so that you are prepared to pay these fees when the time comes. If you are considering listing your home on the market, you should contact your mortgage lender and ask how much money is in escrow compared to the price that you will owe. If you have structured your mortgage appropriately, then it is possible that much of this money is accrued.

What Are the California Capital Gains Tax Rates?

The capital gains tax rates for selling real estate in California are similar to selling other types of property. When your house is put under contract, capital gains tax rates apply and this means that you will pay taxes on the amount earned after selling.

The capital gain rates vary between different buyers. If the house has been owned for less than a year, there will be a 15% capital gains tax applied. If the home was owned for a period of time greater than one year, the rates would be 20%. These numbers have the ability to fluctuate slightly based on income.

Is There Anything Else I Need to Be Prepared for Before Selling?

If you are looking to sell your home quickly, one of your best options will be looking into a home buying group like Proud State Home Buyers. Since many homeowners are in a tight financial situation due to capital gains taxes, it is likely that they do not have the ability to contribute to additional upgrades that are needed to get the house in selling condition.

If this is the case for you, consider working with a home investment group. Proud Start Home Buyers will help you get cash in hand fast so that you have the financial assets you need to relocate.

Summary

If selling your home, you will need to determine if this decision makes financial sense and if you can expect to net positive on any income. When selling your home, you should contact your mortgage lender and ask how much money is in escrow compared to the price that you will owe.