Capital Gain Tax Exemption on Sale of Property

Reducing Property Taxes Capital Gain Tax Exemption on Sale of Property

No More Tax Woes With a Capital Gain Tax Exemption on Sale of Property

The deal is done—you’ve found someone who loves your home and is offering the right price, and you are looking forward to the financial rewards of having sold at a higher price than you bought for years ago. Then the crash—the IRS steps in and demands a huge slice of the profit you have made under the title of capital gains tax (CGT).

CGT affects anyone who sells an asset for more than they paid for it. Thankfully, DoNotPay can help you access a capital gain tax exemption on a sale of property and save your money.

What Is Capital Gains Tax?

Capital gains tax is levied on any increase in the value of an asset that you sell. This applies to:

  • Cars
  • Stocks
  • Shares
  • Collectibles
  • Real estate

You only pay capital gains tax when you sell your property, and it is a once-off charge that is recorded when you fill out your annual tax return. It is different from property tax, which is paid annually for as long as you own the property and is separate from your annual income tax returns.

Before you sell your property, it is worth investigating what the CGT implication will be so that you can plan accordingly.

The first step is to understand what kind of CGT you will be liable for.

What Are the Types of Capital Gains Tax?

There are two types of CGT—which one applies to your property sale depends on your situation:

  1. Short-term CGT
  2. Long-term CGT

Short-Term CGT

Short-term CGT is applicable to you if you sell your property within a year of buying it. In this case, the U.S. Government does not set special CGT rates but rather regards any profit you make as normal income and expects you to file it as such. It will then be taxed at your usual income tax rate.

Long-Term CGT

If you have owned your property for more than a year, you are liable for long-term capital gains tax. The tax you pay is based on your status and income, and there are four statuses and three brackets that determine the tax percentage.

The CGT tax rates are much lower than the income tax you pay, so it is worthwhile to hold on to a property for more than a year.

Long-term CGT is dependent on your income and filing status and uses the following rates:

StatusAnnual Income ThresholdCGT Rate

Single

$0–$40,0000%
$40,001–$441,45015%
>$441,45120%

Married, filing jointly

$0–$80,0000%
$80,001–$496,60015%
>$496,60120%

Head of household

$0–$53,6000%
$53,601–$469,05015%
>$469,05120%

Married, filing separately

$0–$40,0000%
$40,001–$248,30015%
>$248,30120%

You can avoid CGT altogether if you fall into the lowest annual income bracket. There may also be other ways to avoid being liable for capital gains tax.

How Can I Get an Exemption From Capital Gains Tax When I Sell Property?

If you have owned your home for a minimum of two years and have lived in it for that time, it qualifies as your primary residence. In this case, you may gain an exemption from the capital gains tax, as long as you haven’t claimed any other CGT exemptions in that time.

The exemptions available are based on the amount of capital gain—profit—you have made. The IRS typically allows you to write off $250,000 in capital gains if you are single and $500,000 if you are married and filing jointly.

DoNotPay can help you check your eligibility for this or any other exemption.

DoNotPay Can Help You With Property Tax Too

If tax is a worry, you may also want to think about the other big hit you take every year—property tax. Even if you live in a state with low property tax, it can still add up to a significant annual hit. DoNotPay is your go-to resource for help with property tax exemptions.

There are many exemptions that are widely available, including:

Our app checks where you live, gathers some basic information about you, and generates customized advice on what exemptions you can claim for. The app has two sections:

Property Tax ExemptionsProperty Assessment Appeals
  • What property tax exemptions are available for you in your area?
  • Which documents do you need to fill in and submit?
  • Where do you need to file your application?
  • How should you work with a property assessor?
  • How can you appeal an assessment you think is wrong?

How Do I Get DoNotPay’s Property Tax Guide?

Our guide is easy to download—you only need to follow these instructions:

  1. Using any web browser, sign up for DoNotPay and find the Property Tax feature
  2. Answer the questions about yourself and your property
  3. Wait while the app generates a customized guide to your property tax reductions

Use DoNotPay To Help You Lodge an Appeal

If you are looking for further ways to reduce your property tax liability, there are several things you can do that may help you pay property tax:

  • Always check your tax bill for accuracy
  • Be around when the assessor appraises your property
  • Avoid making any improvements to your property that will significantly increase its value

If you do all of these and still feel your property tax assessment is unfair, you have the option of appealing it. The process can be daunting, but DoNotPay can help you learn what you need to do and where you need to lodge your appeal.

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