Capital Gains Tax Calculator & Real Estate 1031 Exchange



 
 

Capital Gains Tax Calculator

This capital gains calculator estimates the tax impact of selling your investment property. It will also help you estimate the financial value of deferring those taxable gains through a 1031 like-kind exchange instead of a taxable sale.

It is important to realize that tax law changes and personal situations vary so use this calculator as an estimate only and verify all numbers with a competent professional before making any decisions.

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Original purchase price ($):
Capital improvements ($):
Accumulated depreciation ($):
Sales price:
Deductible closing costs ($):
Federal capital gains rate (%):
State capital gains rate (%):
Mortgage loan balances at sale ($):
Results
Net adjusted basis:
Capital gain:
Depreciation recapture (25%):
Federal capital gains tax:
State capital gains tax:
Total taxes due:
Gross equity:
After-tax equity:
Sale reinvestment (after-tax equity X 4):
Exchange reinvestment (gross equity X 4):

What Will The Tax Impact Be When You Sell Your Investment Property?

Do you need to estimate the tax-related consequences of selling your investment property?

There are several variables that go into that equation.

But don’t worry, the Capital Gains Tax Calculator will help you find the result as well as an estimate of the financial value of deferring those taxable gains through a 1031 like-kind exchange instead of undertaking a taxable sale.

Read on to learn more about the capital gains tax.

Capital Gains Tax

A capital gains tax is a tax on capital gains which is the profit realized on the sale of a non-inventory asset that was purchased at an amount that was lower than the amount realized on the sale. For example, capital gains tax comes into play during the sale of a home.

Capital gains tax is calculated from the profit you earned from selling your assets based on the country’s tax laws.

What Are Capital Assets?

A capital asset is defined to include property of any kind held by an assessed, whether connected with their business or profession or not connected with their business or profession. Stocks, bonds, mutual funds, real estate properties, gold, coins, fine arts and other collectibles are considered capital assets.

They are basically the assets that you own that are used for personal or investment purposes. The profit you earn for disposing these properties are subject to capital gains tax when they are sold. But the income generated for these properties such as rent, dividends, interest or royalties are subject to a normal income tax.

Short Term Vs. Long Term Capital Gains

Long or short-term capital gains are determined based on the holding period of the property before you sell it. If you hold your property more than one year, it is already considered a long-term capital gain or loss. On the other hand, if the property was held a year or less, it is a short-term capital gain.

In 2013, short-term gains were taxed at the maximum tax rate, as high as 43.4%. Most long-term gains are taxed at 0%, 15%, or 20%. There are certain conditions where a gain from disposal of capital asset is exempt from taxes. Check with your financial advisor to see if you could qualify for this exemption.

Tax Rates For Collectible Items

Collectible assets held for a longer period of time are taxed at a flat rate of 28%. Gains on sale of other collectible assets that have less than a one-year holding period will form part of your normal income. The collectible assets are as follows:

  • Gold, silver and other precious metals of gems
  • Paintings and other fine arts
  • Stamps
  • Old coins
  • Rare rugs
  • Antiques
  • Alcoholic beverages

Capital Losses Carried Forward

A capital loss happens when you dispose a capital asset at a value lower than the purchase price. A capital loss is deducted from your capital gains and the capital gains tax will be calculated on the net capital value. If the capital loss exceeds the capital gains for the year, the difference will be applied in the succeeding year as if the loss incurred was incurred in the next year.

Keep A Record

Capital assets are taxed differently when disposed. Therefore, it is very important that you keep a record of your capital assets since this is important when calculating the capital gains or loss. This also comes in handy especially if you intend to hold your capital assets for a long period of time. The following are the records that are essential in calculating capital gains tax:

  • Purchase price
  • Improvement capital expenditures
  • Insurance, brokerage and taxes paid
  • Commissions paid to your broker and accountant
  • Details of interest for the money owed relating to the capital asset
  • Maintenance cost, repairs, etc.

Final Thoughts

It’s imperative that you seek the services of a competent professional when calculating capital gains tax. Find someone who can help you keep records and offer advice to ensure you’re saving the most money.

Don’t let the capital gains tax hold you back from investing, but do your homework to invest wisely with the capital gains tax in mind.

Capital Gains Tax Calculator Terms & Definitions

  • Purchase Price – The amount paid for acquiring a property.
  • Sale Price – The value received for disposing of a property.
  • Holding Period – The number of months or years that you possess your property.
  • Depreciation – The reduced value of a property due to wear and tear.
  • Capital Gain – The amount earned due to an increased value of an asset after disposal.
  • Capital Gain Tax – A tax on capital gains which is the profit realized on the sale of a non-inventory asset that was purchased at an amount that was lower than the amount realized on the sale.
  • Capital Loss – The difference of selling a property at a price lower than the purchase price.
  • Capital Improvement – Any addition or change to real property that meets all three of the following conditions: It substantially adds to the value of the real property, or appreciably prolongs the useful life of the real property.
  • Deductible Closing Costs – Fees paid at the closing of a real estate transaction that are tax-deductible.
  • Depreciation Recapture – The USA Internal Revenue Service (IRS) procedure for collecting income tax on a gain realized by a taxpayer when the taxpayer gets rid of an asset that had previously provided an offset to ordinary income for the taxpayer through depreciation.
  • Equity – The value of a property after deduction of charges against it.
  • 1031 Exchange – Section 1031 is a section of the U.S. Internal Revenue Service Code that allows investors to defer capital gains taxes on any exchange of like-kind properties for business or investment purposes.
  • Capital Asset – Includes properties of any kind held by an assessed, whether connected with their business or profession or not connected with their business or profession.

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