- August 19, Bergen Record
Q. I recently sold a town house and was concerned about how much tax I would be responsible for paying. I sold it for $375,000. There was no mortgage on the property, and I hadn't lived in it since 2007.
I had done a lot of improvements on it to increase its value for sale and had hopes of claiming it on my taxes for 2013. Is there some sort of estimated formula I could use to estimate how much I could expect to pay in taxes?
If this had been your primary residence, we would be happy to tell you that you don't owe any tax. In fact, if you had simply lived in the home for two of the last five years, or through 2009 if you sold it in 2012, you still wouldn't owe any tax as long as your profit was less than $250,000 if you're single or $500,000 if you're married.
However, that doesn't seem to be the case here. You didn't supply all of the information we need to assess your situation, but we can make some educated guesses about what has happened and point you in the right direction.
Let's start with how profit and the cost basis are calculated. When you sell a home, the IRS wants to know not only how much you paid for the property, but what capital improvements you made to the property (adding a room or replacing the roof, as opposed to painting a bathroom), and how much it cost to sell. If you add up the costs of purchase, sale (including the commission) and capital improvements, you will get your cost basis. The profit is calculated by subtracting the cost basis from the total sales price....
Read the rest of the article here and let us know how we can help you in the sale (or purchase) of your home!
-Daniel Barli, Esq.
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