How JustAnswer Works:
  • Ask an Expert
    Experts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional Answer
    Via email, text message, or notification as you wait on our site.
    Ask follow up questions if you need to.
  • 100% Satisfaction Guarantee
    Rate the answer you receive.
Ask Christopher Phelps Your Own Question
Christopher Phelps
Christopher Phelps, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 2710
Experience:  CPA, CFP, PFS, Tax Practitioner 21 Years, Member AICPA/CSCPA Tax/Financial Planning Committee Member
84937
Type Your Tax Question Here...
Christopher Phelps is online now
A new question is answered every 9 seconds

What is the capital gains tax rate for Alabama

Resolved Question:

We are selling a rental property and was wondering what our capital gains penalty would be? We've had the property well over 5 years. It wouldn't hurt to know the federal tax too.

Thanks...

Optional Information:
Decatur, Alabama

Already Tried:
web searches





Submitted: 10 years ago.
Category: Tax
Expert:  Christopher Phelps replied 10 years ago.

The difference between your net sales price and your cost basis (adjusted for improvements and depreciation) is your capital gain.


Your net sales price is the contract selling price less any selling costs (i.e. broker commissions and other transaction costs as well as fix-up expenses if real property is involved).


Your cost basis is determined by taking your original purchase price (plus any non-recurring closing costs) and adding the cost of any improvements made during ownership and then subtracting any allowable depreciation (whether claimed or not). If you inherited the property you would claim as your acquisition cost the value for the asset claimed in the decedents estate tax return. If no estate tax return was filed then you use the fair market value of the asset (supported by an appraisal if not readily determinable) as of the date of death.


If you own the property for more then one year, then the gain will be treated as a long-term gain and will be taxed up to a maximum capital gain rate of 15% (5% if the gain would otherwise be taxable in the 10% and 15% brackets). Otherwise the gain is treated as a short-term capital gain and to the extent not offset by other capital losses will be considered as ordinary income the same as wages and interest subject to whatever your marginal tax rate is.


Alabama does not have a separate capital gain tax rate. Instead, it treats capital gain the same as all other income and subjects it to your marginal state tax rates. Accordingly, depending on the amount of the gain and your other AL taxable income the tax on the gain from the property sale could range from 1% to 5%.

Because it is impossible for me to identify and consider ALL the relevant facts, this advice is not intended or written to be used for the purpose of avoiding penalties, and cannot be used for that purpose.
Christopher Phelps and 2 other Tax Specialists are ready to help you
Customer: replied 10 years ago.
Reply to Christopher Phelps's Post: Thanks for the Alabama information...

Does it matter that we have owned the house since the early 90's? One web page that I've seen had it broken down like this: less than 1 year, more than 1 year, & more than 5 years. I believe the tax code has changed and there's no such thing as a ultra long-term investment anymore, true?

We have refinanced the house twice (we're on our third loan)...does our "ownership" go back to the original loan or just back to our latest loan (still more than a year ago)?
Customer: replied 10 years ago.
Relist: I still need help.
Expert:  Christopher Phelps replied 10 years ago.

There were at one time reduced capital gain tax rates for assets held more then five years. However, this only applied to assets purchased subsequent to the year 2000 and this law was superceded by the new law effective 5/6/2003.


Your ownership period starts the day you originally purchased the property. Refinancing the mortgage does not reset the purchase date.


Because it is impossible for me to identify and consider ALL the relevant facts, this advice is not intended or written to be used for the purpose of avoiding penalties, and cannot be used for that purpose.

Christopher Phelps and 2 other Tax Specialists are ready to help you

Related Tax Questions