While we always suggest consulting with a tax expert to get the most detailed and accurate account of the taxes you will owe on your next real estate transaction, below is an outline of what you can expect when selling your home in Los Angeles.
CAPITAL GAINS
Capital gains tax charges you on the difference between the amount you paid for the property and the amount for which you sold the property. The amount you earned between the time you bought the property and the time you sold it is your capital gain.
Both the IRS and the state of California will collect taxes on the sale of your home with a $250k exemption for single people and a $500k exemption for married couples. For example, if you bought a home for $400k and you sell it for $1mil, your capital gain is $600k.A single person will pay taxes on $350k and a married couple will pay taxes on $100k.
In the event the following are true, you may not qualify for this exemption:
- In the five years before you sold the property, you didn’t live in it for at least two of those years. If you are in the military, disabled, or in the intelligence community, then this rule doesn’t affect you. You still qualify for the exemption.
- You owned the house for less than two years.
- You are paying expatriate tax.
- You bought the house through a 1031 exchange in the past five years.
TRANSFER TAXES
Documentary transfer taxes are taxes that counties and cities charge on documents that grant, assign, transfer or convey real estate.
Los Angeles County's current transfer tax rate is $1.10 for every $1,000. So, for a $1,00,000 house, the transfer tax due will be $1,100. Most purchase agreements, as a standard feature, state that the seller will pay the transfer tax. The City of Los Angeles transfer tax rate is currently $4.50 for every $1000, so on a $1mil property that would be an added $4,500.
Contact us today to learn more about all of the taxes and fees associated with selling your home. You can visit our previous blog post to learn more about Measure ULA which is on the Ballot on November 8th.