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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%.
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 However, this only applied to assets purchased subsequent to the year 2000 and this law was superceded by the new law effective 5/6/2003.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.