We Buy Houses In Ohio. Did you know that when you sell your home or investment property, you may owe taxes on the profit? Given how much taxes can eat into your earnings, this is one financial surprise you’ll want to prepare for—especially after investing significant time and money into the property.
Capital gains taxes apply when an investment in capital assets, like real estate, increases in value and is later sold. At the time of sale, the gain is considered “realized” and subject to taxation.
The IRS categorizes capital gains differently based on how long the asset was held—either short-term or long-term. To determine taxable gains, investors can deduct the cost basis (original purchase price) and eligible improvement expenses from the total profit.
Smart real estate investing includes tax planning from day one. Before purchasing your first investment property, it’s essential to develop a strategy that minimizes capital gains taxes when it’s time to sell. In this guide, we’ll explore key points Ohio home sellers should know about capital gains taxes.
Limits On Capital Gains Taxes
Capital gains taxes are subject to specific rate limits designed to regulate government revenue and prevent excessive tax burdens on investors. As an Ohio home seller, it’s essential to understand how these tax brackets apply to your situation and how they can impact your profits when selling a property.
For the 15% capital gains tax rate to apply, your taxable income must fall within the following ranges:
- Single filers: $80,000 to $441,450
- Married filing jointly or qualifying widow(er): $80,000 to $496,600
- Head of household: $80,000 to $469,050
- Married filing separately: $80,000 to $248,300
If your taxable income exceeds these limits, any capital gains beyond these thresholds will be taxed at a 20% rate, with certain exceptions. Additionally, individuals with higher incomes may be subject to an additional Net Investment Income Tax (NIIT), further increasing the tax liability on profits from real estate sales.
On the flip side, if you experience capital losses, you can use them to offset gains, reducing your overall tax burden. However, there are limits on how much excess loss you can claim within a given tax year, so it’s crucial to plan accordingly.
By understanding these tax brackets and planning strategically, Ohio home sellers can make more informed decisions, minimize unnecessary tax expenses, and maximize their investment returns. Consulting with a tax professional can provide valuable insights and help you take advantage of tax-saving strategies tailored to your specific financial situation.
Capital Gains Tax Exclusions & Strategies
Ohio home sellers may qualify for a capital gains tax exclusion every two years, allowing them to keep more of their profits. Married couples filing jointly can exclude up to $500,000 over their cost basis, while single filers can exclude up to $250,000. To qualify, the property must have been used as a primary residence for at least two of the last five years—though those years don’t need to be consecutive.
Additionally, some sellers may need to make estimated tax payments on capital gains. Consulting a tax advisor is a smart move to ensure you’re making the best financial decisions.
If you’re looking to defer capital gains taxes, a 1031 exchange allows you to reinvest proceeds into a similar property. You can also offset gains with capital losses to reduce your tax burden.
To maximize your earnings and minimize taxes, it’s essential to have a strong team of tax professionals guiding you through the process.
Sell My Ohio House Without Paying Capital Gains Taxes
Homesmith understands the ins and outs of capital gains taxes for Ohio home sellers and how you can minimize or even avoid them. One option is to sell directly to Homesmith, simplifying the process while maximizing your returns. Another strategy is to reinvest in a “like-kind” property from our carefully curated inventory of investment opportunities, utilizing a 1031 exchange to defer capital gains taxes.
At Homesmith, we make it easy to keep your hard-earned investment profits working for you—helping you build long-term wealth and generate passive income with smart, strategic real estate moves. Let us help you navigate your options and secure your financial future with long-term passive income for you! Call Homesmith at (614) 401-3651 or (877) HOMESMITH or send us a message today!