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Understanding capital gain and how it’s taxed

| Jan 28, 2015 | Commercial Real Estate |

When selling a property in Arizona, there are many issues that must be considered. While the idea of a sale is profit, there are other important factors to remember, such as the taxes that will be assessed for a capital gain from the sale. Those who don’t pay strict attention to this might have to deal with financial difficulties in the long-term. There are various taxes that will come to the forefront for a sale.

How much tax will be paid when property is sold is contingent on how much the property was sold for. If, for example, the property was sold at a loss, there will likely be few taxes to pay. If the sale led to a profit, then there will be various taxes, like capital gains, state income tax and recapture tax. These are in effect whether it is a property that was intended to be for investment or if it was private. The capital gains tax is for property that was sold at a profit.

In order to calculate the amount that is profited, the closing costs and commissions are subtracted from the sale price. The adjusted cost basis will be calculated by adding what was initially paid for the property, those closing costs and the costs of any improvements to the property that were paid for. The tax will be paid on what’s left after the subtraction of the adjusted cost basis is made from the sale basis. A property that has been kept for at least one year had, as recently as last year, a rate of 15 percent. The adjusted gross income will also be important in the percentages with other issues, like the Medicare surtax assessed. The higher the income, the higher the capital gain will be. If it is a corporation that is making the sale of commercial real estate, there is a regular income tax on corporate gains.

Whether a person is involved in selling properties as a business or is simply selling a personal property, the tax implications are not to be ignored. Doing so can curtail profit and lead to financial difficulties that are hard to recover from.

Source:, “What Percent of Taxes Do You Pay for Selling Real Estate?,” Steve Lander, accessed on Jan. 27, 2015

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