Capital gain investment property

Questions and Answers

capital gains if you move into your buy to let?

Q) I own three houses that are let as investment properties My wife and i are seperating and i amconsidering moving into one of the buy to let properties and getting rid of the tenant What are the capital gains tax implications of doing this. Have I effectively sold the investment property to myself at the market value on the day I move in?

A) Waggy does know something about tax. Unfortunately, he has answered a question posted in the UK section based on US tax law. Now, assuming that you hold the properties personally - no partnership and no limited company - you have no immediate tax issues. You will not be treated as having disposed of it to yourself. A period of principal private residence can only reduce your taxable gain, never increase it. Likewise, it will reduce any allowable loss. So the future tax issues are not painful either. Old know all gives a simplistic answer. When/if you come to sell, engage a Chartered or Certified Accountant to do your return. There are a few kinks in the law which will save you more tax than you might think.

What options are there in paying capital gain taxes on real-estate investment property?

Q) I am selling 3 acres of land for a substantial gain and would like to avoid paying 30 percent of my selling price in capital gain taxes. Are there tax breaks that allows for reinvesting without taking a big hit in taxes?

A) Yes, do a 1031 exchange, in which you replace the land that you sold for new land. All you are doing however is merely postponing the tax, not eliminating it. I have attached a link regarding 1031 exchanges. By the way, if it's long-term gain, the federal tax rate would be maximum of 15%, don't know about state tax effect as I don't know the state you live in or the state the land is in.

how much is taxed in percentage when i sell an investment residential property? i mean for capital gain.?

A) If you own the property for greater than a year it will be 5% or 15% depending on your marginal tax rate. If you did not own the property for one year it would be taxed as ordinary income at what every your rate would be for the total taxable income. Sorry about that I just noticed that you are in the UK not the US. So this answer would only apply if the property were in the US and you were paying US taxes.

How long do I have to keep a investment property to pay capital gains or Ordinary income....1 or 2 year?

A) Any investment held over a year pays capital gains taxes. Stocks, real estate or other investments.

How do you estimate what your capital gains tax would be on investment property?

Q) This is a difficult situation. We own a piece of undeveloped land in FL and are considering selling to put a down payment on a house in CA. We have owned it for about 14 years. My husband is military and a FL resident. We currently are stationed in CA and I am a CA resident. The land is a joint tenancy. FL doesn't have a capital gains tax, but CA does. So I am guessing that we have to split the gain 50/50 and have 50% taxed by the state of CA. We are trying to use an online capital gains tax calculator to figure how much we will have to pay. We had an assesment to pave the street. Would that be an improvement cost? Also, the state bought a small portion to widen a highway. Would the money they paid us be deducted from the basis? How do you come up with the depreciation? My property value has went up (according to the county assessment). How do you figure out what the tax rate is on the gain? I know this is tough one, but I appreciate all the help.

A) If you file a joint CA return, ALL of the gain is subject to CA tax. If you file a separate return, only your half of the gain is taxed. The entire gain is subject to Federal capital gains tax. The assessment raises your cost basis and therefore will lower the gain. What the state bought constitutes a sale of part of the property. That was a taxable event when it occurred. You may or may not have taxable gain that needs to be claimed in the year of the sale. It will reduce your basis for the remaining portion of the property as well. Land is never depreciated. No tax impact with that. Since the property was held for over one year, the tax rate is 15% unless your marginal rate is 15% or less in which case it would be 5%. (Had you held it for 1 year or less it would be taxed at your marginal rate.) That's the Federal rate. Not sure what the CA rate is. If I find it, I'll post more later but it's late and I'm heading to bed. That was easy!

Can rental losses be subtracted from capital gains when selling a rental investment property?

Q) My wife and I live in a rented apartment in CA and own a home in AZ that we have rented out. Last year our losses on the AZ property (Interest + prop. taxes + repairs + depreciation - rentalincome) was 14K (reported in schedule E and form 6198). Now since our total W2 wages in CA are >150K we can't deduct the 14K from our adjusted gross income. Question is can this no. be carried forward each year (as losses) and later when we sell the rental investment property can the sum of all these yearly losses be subtracted from the profit we make by selling the rental property? Also, someone suggested that the smarter thing to do would be to form an LLC and start getting a tax-break from the losses we are making every year. Is that true?

A) The only one that will make any money by you forming an LLC is the attorney that does it for you. Do not form an LLC in California under any circumstances if you gross is under a million dollars and in most cases not in that case if you are doing it for tax purposes.

what is the capital gains tax rate for an investment property i sold this year. It was coporate owned by me a

Q) and held for more than a year

A) Your question isn't worded grammatically correct and, I believe, is being misinterpreted. Are you saying you owned part of a corporation that you purchased as an investment and sold it after a year? If you owned stock in a corporation and held it for over a year and sold it, you will have long term gains (or losses). If this is the only capital gains you had all year, it will be taxed at 15% if your marginal tax rate is greater than 20%, and it will be taxed at 5% if your marginal tax rate is less than 20%. If it is a loss, it will offset other income up to $3,000...the remainder (if any) will carry over to next year. If you had other gains or losses, all of them net together.

Reinvesting the captial gains from an investment property into another property? How does that work?

Q) Is it true that if you use the capital from the sale of an investment property and put that towards another property that you will not be taxed on the capital gains via tax? How does this work exactly? And can you use the capital gains toward any type of property such as a primary residence or a second home or does it have to be toward another investment property to avoid paying capital gains tax on those proceeds?

A) The 1031 (refers to Internal Revenue Code Section 1031 which explains the exchange) "like-kind" exchange has specific criteria to qualify as a nontaxable event. You must exchange for similiar BUSINESS USE property and you must use a qualified intermediary if you are buying/selling real estate that is not a "direct" exchange. The delayed, non-direct exchange is referred to as a "Starker" exchange. The qualified intermediary will handle all money - if any actually comes to you (or an account where you have access, etc) the exchange will not qualify. After selling the property you must identify replacement property within 45 days (EXACT property with legal description) and take posession of replacement property within 180 days. Hopefully this helps. The IRS website has a publication on like-kind exchanges which may help you. You can download here: http://www.irs.gov/publications/p544/ch01.html#d0e2447

i am selling investment property for which i will have large capital gains .?

Q) my normal tax bracket is close to 0 as depreciation covered my income. ihave heard that capital gains will be taxed at capital gain rates or my ordinary income rate which ever is lower. Is that true.

A) I'm assuming that you are selling a property that you have been depreciating. I don't know if you are a real estate professional who has been writing off your losses as you go or a passive investor, but I will assume a passive investor. You Willl compute your gain on the sale of the property under normal rules. You gain will then be taxed at 25% to the extent of depreciation taken on the property that you sold. Any gain above this depreciation amount wil be taxed at the 15% capital gains tax rate. In addition this gain will be passive income that will allow you to use your passive losses to the extent of the passive gain which is deductible in full on your return as an ordinary loss.

Which amount do I pay UK Capital Gains (2nd property) on?

Q) We brought a 2nd investment property with cash 3 yrs ago. When I sell will we have to pay Capital Gains tax on just the amount the property has increased or the full price. Ie paid 120k selling for 180k will I pay cap gains on 60k or 180k?.

A) You pay tax on the gain, in this case 60k. From this deduct taper relief, if applicable, and annual allowance, if not already used.

If I buy a investment property and then refinance it. will my capital gains be based on the original price or?

Q) the refinanced amount owed to the bank. Which may be $20 to $30K higher than the original price due to so much equity in the property.

A) It will be based on the original purchase price, plus the cost of any improvements you've made. Save those receipts!