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Ed Johnson
Ed Johnson, Tax Preparer
Category: Tax
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Experience:  GPHR Cert; U.S. Treasury Tax Advocacy Panel appointee
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I am about to sell a condo for $190,000 that i ...

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I am about to sell a condo for $190,000 that i purchased five years ago for $166,00. I spent about $5000. preparing the condo to be sold, and the realtor''s fee will be about $12,000. Are those legitimate deductions? And, what will my likely tax be on the amount that is still a capital gain. Thanks, XXXXX XXXXX
Submitted: 6 years ago.
Category: Tax
Expert:  Ed Johnson replied 6 years ago.

Dear fauna,

Thanks for your question.

The expenses you indiate are legitiimate expenses.

The capital gains formula is:

capital gains = sell price of the condo - (orignal price you paid, + major repairs, + improvements, + closing costs you did not previously deduct) - cost of selling.

Major repairs are any repairs made to last one year or longer.

The tax is 15% of the capital gains.

NOTE 1: If you lived in and owned the property as your primary residence for two of the last 5 yeas, you can take a capital gains exclusion of 250,000 if you file a married seperate or single return. If you file a joint return, you can exclude 500,000 of the capital gains from tax. Since your gains are obvioulsy less than 250,000 you would attract no capital gains tax provided you accumulated two years in the last 5 of using this property as a primary residence. the two years do not have to be consecutive months. You can total all the time spent living in the condo as your primary residence over the past 5 years to accumulate two years.

NOTE2: If this was not a second or primary home, but was investment rental property or property held for investment you can defer the capital gains by doing a like kind exchange. BUT to do this, you have to designate the exchange prior to closing and use a like kind exchange agent.

Ed Johnson, Tax Preparer
Category: Tax
Satisfied Customers: 10760
Experience: GPHR Cert; U.S. Treasury Tax Advocacy Panel appointee
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