I’m selling a property in Orlando, FL. – will I pay Capital Gains Tax?
If you are thinking of selling property in Orlando FL you need to understand the potential impact of capital gains tax. In simple terms, capital gains on investment real estate is the difference between the sales price and the purchase price and improvements. If the property has been used to generate rental income then depreciation may have been used annually to minimize income tax liability and must be “added” back into the final calculation.
Remember, capital gains are taxed at either short term or long term rates. Gain on property held for less than one year is taxed at regular income tax rates while gain on property held for greater than one year is subject to a reduced rate of 15%.
To calculate your potential for capital gains tax take the sale price minus costs of purchase and sale, original purchase price, improvements plus any depreciated claimed on the property.
Remember, nonresidents are subject to the 10% FIRPTA Withholding on the sale of U.S. property.
Want to defer paying capital gains tax? You may like to consider a 1031 Exchange where you sell your property and use the profits to buy a like-kind property without paying any federal tax. The tax is deferred until the eventual sale of the replacement property.
Harding & Associates Tax Services, Inc
For more information on selling property in Orlando Fl contact our office today and ask to speak to one of our licensed, experienced Realtors. We will prepare a free, no obligation valuation for your property including a breakdown of the costs involved in selling property in Orlando FL.