Pay Capital Gains Tax On Second Home Sale

Added January 19, 2009 by Ilyce R. Glink

Print Articles

Summary: If you own a second home and decide to sell it you'll have to pay capital gains tax. To calculate your capital gains tax you first have to calculate the sales price after subtracting the cost of any improvements you made to the home. The sales price that's taxed will most likely be less than the market value of the home.

Q: My wife and I purchased our second home in Wisconsin for $320,000 in 1991. My wife passed away last year. The house has been valued at $1.5 million.

How do I calculate taxes on my gain if I sell this year?

A: On a second home sale, you will be taxed on long-term capital gains. You can calculate this by taking the sales price, and subtracting the costs of the purchase and sale of the property, then subtracting the cost of any capital improvements (not including decorating) or structural additions you made to the property over the years.

Let's assume that after subtracting the costs of sale, you net out at $1.3 million. If you spent $320,000 to buy the place, and had another $250,000 in structural improvements over the years, your capital gains would be around $720,000. On that amount, you'd owe federal capital gains tax of 15 percent plus any applicable state tax.

For more details, please speak to your accountant or tax preparer.

Jan. 19, 2009.

See more articles on this topic by clicking on the "RELATED ARTICLES" above and to the right.

We have over 5000 articles on Real Estate Advice, Personal Finance Advice and Consumer Advice on our site. We encourage you to look at these articles. As always, if you have a comment on our articles, don't forget to post your comment below. We thank you for coming to ThinkGlink.com.

© Ilyce R. Glink. All rights reserved. This content may not be used, distributed, syndicated, compiled or excerpted in any medium or form without written authorization from Think Glink, Inc. For information on syndicating ThinkGlink.com please contact us.

Previous article Next article