What Is My Taxable Capital Gain?
I received the following e-mail question, and thought the answer would be of general interest to the board. To protect the privacy of the author, I will only use the author's initials.
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I bought a house back in Feb. borrowed my Equity from my home to buy it. Rehabed it and now am selling it for a 25k profit. Being that I payed cash for the home if I place a first mortgage on it before selling it like 80/20. I should only have to pay tax on the 20 correct? I have had lots of comments on this but am still unsure. Can you help me? |
K.L.,
Your cost basis and your actual net sale proceeds determine your taxable profit on the sale of your property.
Your tax liability will be the same if you own the property free and clear, or have a large mortgage balance. Your loan amount has no bearing on your income tax calculation. [ Edited by DaveT on Date 07/28/2003 ]
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