Capital Gains Tax Clarification
All,
Thanks in advance for reading my questions. I have read a couple different posts that said CGT is based on purchase price not what is owed on the property. So if I was to refi, getting the LTV as close as possible and take out my equity, would I still have to pay CGT on the profit I made over the original purchase price or would it be based on how much I owe?
My second question is to find out the determining factor as to whether income from the sale of a property will be subject to CGT or whether it is just taxable income what is the approximate different in the rates (I know income tax varies according to the bracket you are in).
Thanks again! 
If you do a cash-out refi, this money is tax free and will not have anything to do with capital gains.
Capital gains is only paid when the property is sold (and not 1031 exchanged). It is calculated as follows: sales price - property basis = taxable amount. The property basis is the original purchase price - total depreciation (assuming no capital improvements were made).
The capital gain would be triggered if you sell the property regardless of how much you owe, unless you do a 1031 exchange. The debt is merely how you finance the property and has nothing to do with how much you paid for the property. The CBT is essentially the sales price less closing costs less original costs (including improvements).
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Bill Exeter[ Edited by JohnLocke on Date 06/19/2004 ]
from: http://www.smartmoney.com/tax/capital/index.cfm?story=capitalgains&nav=LeftNav
There's a lot to keep track of: While short-term gains are taxed as ordinary income, the taxes on long-term gains (for assets held more than one year) can range from 5% to 28%.
Also, check out:
http://www.smartmoney.com/tax/capital/index.cfm?story=taxrates
Thanks to everyone for the clarification!! I appreciate all the great information.