Today we want to talk about a pretty important topic: capital gains taxes. No one likes paying taxes, but understanding how they work is a key part of building long-term wealth, so let’s talk.
Capital gains tax the appreciation of an asset.
This could be stocks, bonds, artwork, or any other valuable that appreciates over time. So how do they affect the real estate market? Keep in mind that capital gains rates are lower than income tax rates, so plan accordingly.
"A ton of clients have been surprised by how much capital gains they have to pay."
If you are married, you can defer up to $500,000 in gains, and if you’re single, you can defer up to $250,000. There are also long-term and short-term gains taxes, but for real estate, we’ll be talking about long-term gains.
In California, there is an additional state-level capital gains tax, so don’t be caught off-guard when you sell your home. After the pandemic, home prices have skyrocketed, and a ton of clients have been surprised by how much capital gains they have to pay.
Make sure you budget any taxes into your post-sale budget so that you aren’t surprised.
If you have any questions about today’s video, please call or email us. We're always happy to help.