Congratulations on selling a home next door to a drug dealer for a $90,000 profit. The great news is, you didn't have to sell at a loss. The bad news is, yes, you will have to pay taxes on the gain.
In order to calculate your gain, you will take your original cost, and add anything which increases the basis. Some of the fees you paid when you bought it can be added to the basis. Here's an article which explains how to determine your basis:
https://www.nolo.com/legal-encyclopedia/determining-your-homes-tax-basis.html
Then, you need to determine your net proceeds. That will be the sale price, minus any costs of sale. You can deduct the cost of the real estate agent fees, cosmetic improvements and staging to increase sellability, and seller paid closing costs, from the net proceeds. The difference between your basis and net proceeds is your gain. In order to avoid interest and penalties, you should make an immediate estimated tax payment of the appropriate amount based upon your tax rate and gain calculation.
Nick K, EA
