Selling property - anything to share?

[PierreBear]

Morning PS friends! Does anyone have any wisdom or helpful learning points of selling a property? Also, does anyone happen to know with the capital gains tax , when that should be paid? Someone mentioned that estimated taxes needs to be calculated and paid to the IRS and found some language below on their website. Just not sure if that applies to selling a home? Any help is appreciated as this process is nerve-wracking but possibly almost over!

https://www.irs.gov/businesses/small-businesses-self-employed/estimated-taxes
Taxes must be paid as you earn or receive income during the year, either through withholding or estimated tax payments. If the amount of income tax withheld from your salary or pension is not enough, or if you receive income such as interest, dividends, alimony, self-employment income, capital gains, prizes and awards, you may have to make estimated tax payments. If you are in business for yourself, you generally need to make estimated tax payments. Estimated tax is used to pay not only income tax, but other taxes such as self-employment tax and alternative minimum tax.

If you don’t pay enough tax through withholding and estimated tax payments, you may be charged a penalty. You also may be charged a penalty if your estimated tax payments are late, even if you are due a refund when you file your tax return.

 

[Kbell]

Capital gains tax varies by state I believe & the Federal tax depends on variables:

An important exception to the capital gains tax kicks in when you are selling your home. You can exclude $250,000 of your profit from the sale of your home if you are single and $500,000 of the profit if you’re filing taxes jointly as a married couple. However, you do have to meet specific requirements to claim this exclusion:

• The home must be your primary residence.
• You must have owned the home for at least two years.
• You must have lived in the home for at least two of the past five years.

Anytime I've sold property I've just had my taxes done by a professional. All of the above (federal exemption) applied to me when I've sold in the past. If you do end up owing taxes this will depend on your tax bracket which you can easily look up.

 

[Dee*Jay]

Pierre, are you selling a property that was used for personal use (e.g., your home) or a property that is part of a business or a business transaction? The link regarding estimated taxes does not apply to selling a personal property, which is what I *think* you are asking about here. See Kbell's info on exclusions on capital gains for personal residences. There's more to it though if you reach the $250K/$500K threshold (assuming you meet the "2 of the last 5 years" criteria). I.e., you have to figure basis for the property, which will include capital improvements made over the course of ownership, etc. Without more specific info it's impossible to give you good advice here though and as both a Realtor and a CPA my advice is that you should get professional guidance on this. There are a lot of potential pitfalls and you definitely don't want to end up on the wrong side of Uncle Sam.

 

[PierreBear]

Thank you for the comments thus far! Selling a personal property that is not our homestead (leased it and no longer want to do that anymore) and will not meet any of the capital gain exclusions . I know we will have to pay capital gains tax but just don't understand if we need to remit those fees soon after the transaction occurs or when we file our 2017 tax return. I appreciate the note that the link relates to small business/self employed. We clearly don't do this as a profession but I wasn't clear if this "extra income" would be considered as being self employed.

Side topic - setting the price... if it's a buyer's market do you aim conservatively and hope for multiple bids and get a quick sale? Or price it where everyone else is listing it at? I appreciate it real estate experts!

 

[Dee*Jay]

OK, based on the added info I even more strongly recommend you seek guidance from a professional. I assume you have also been reporting the rental income on your taxes (less applicable expenses)...? There are a number of things at work here!

Regarding the price, that is depending on where you are, if that "where" is urban or rural, what the current conditions are in the market (scarce inventory, level of general activity), when you plan to list, etc. Are you using a realtor? If so that person can give you advice, supported by comps and other relevant data, about strategy. If not... that's tougher because you may not have easy access to all the data that would go into making a valid pricing decision.

 

[PierreBear]

OK, based on the added info I even more strongly recommend you seek guidance from a professional. I assume you have also been reporting the rental income on your taxes (less applicable expenses)...? There are a number of things at work here!

- Yes, rental income has been reported throughout the years! Just haven't dealt with a sale before.

Regarding the price, that is depending on where you are, if that "where" is urban or rural, what the current conditions are in the market (scarce inventory, level of general activity), when you plan to list, etc. Are you using a realtor? If so that person can give you advice, supported by comps and other relevant data, about strategy. If not... that's tougher because you may not have easy access to all the data that would go into making a valid pricing decision.

- Yes, using a realtor but just didn't feel at ease. Understand that there is a lot of conditions into play but I just get the feeling of "the market will tell you what the price should be" type of comments. I think we are in the right range and looking at the comps and other units for sale. I guess we will just need to see how it plays out. PS dust me!

 

[Dee*Jay]

Pierre, there is truth in the concept that the market will tell you what the price will be. If you price too high either no one will come to view the property, you won't get any offers, or you'll get low balls because the bidders will assume you don't know what you're doing. If you price too low you'll have a flood of activity. BUT, if you price *right* you may also have a flood of activity because, well, you're priced RIGHT. Sometimes people who price right and get a flood of activity then second guess because they think they priced too low. Don't fall into that trap -- if there is rational behind your pricing you are good. It's when there are unsupported numbers that you should worry.

MUCH PS dust to you on this deal!!!

 

[PierreBear]

Thank you DeeJay! Wish you could have been our realtor. Then we could also do some ring shopping too. haha : )

 

[violet3]

Hi there! I'm a real estate agent on the East Coast. I strongly recommend that you have a realtor list your house; you can certainly find some comps on your own using zillow and trulia, but those sites aren't always accurate. Your best shot at selling is to use a professional, so that other agents will make their clients aware of your home. Also, it's a legal process, with a lot of legal ramifications if something goes wrong, so it's best to use an agent to help protect you.

Regarding capital gains, you'll need to contact your accountant to find out what amount of capital gains you'll need to pay and when. If you profit on an investment property, you will need to pay capital gains.

 

[Dee*Jay]

Pierre, the would be awesome! The two things I love best in life -- real estate and bling!

 

[liaerfbv]

Thank you for the comments thus far! Selling a personal property that is not our homestead (leased it and no longer want to do that anymore) and will not meet any of the capital gain exclusions . I know we will have to pay capital gains tax but just don't understand if we need to remit those fees soon after the transaction occurs or when we file our 2017 tax return. I appreciate the note that the link relates to small business/self employed. We clearly don't do this as a profession but I wasn't clear if this "extra income" would be considered as being self employed.

Side topic - setting the price... if it's a buyer's market do you aim conservatively and hope for multiple bids and get a quick sale? Or price it where everyone else is listing it at? I appreciate it real estate experts!

We paid a portion of our capital gains tax incurred on a property sale in 2016 a few months after the sale and the remainder when we filed our taxes this year. You'll want to make sure your title company issues you a 1099-S.

 

[PierreBear]

Thanks liaerfbv! How did you decide on paying part of it a few months after and then the rest when you filed taxes? Don't mind hiring a professional but just wanted to be somewhat educated so appreciate the help! Found Publication 523 to be helpful but it did make my head spin a bit.

 

[liaerfbv]

I knew we were going to owe a big chunk and I didn't want to hold onto it for 10 months. We had our CPA give us an estimate and we paid the estimate and ended up owing just a little bit more at the end.

 

[PierreBear]

Thanks again liaerfbf for sharing your knowledge! Hope you have a great day!