topic Are capital gain taxes calculated on the gross profit or would it be on the amount we received after deducting the closing costs and brokerage commissions etc.? in Get your taxes done using TurboTax

Are capital gain taxes calculated on the gross profit or would it be on the amount we received after deducting the closing costs and brokerage commissions etc.?

piyushbk — Mon, 21 Dec 2020 22:56:07 GMT

eg: Purchased amount is 500K, stayed for 1 year 1 month, Sold it for 600K, Profit was 100K, but had to pay approx 40K as closing cost and commissions, what will the capital gain tax be calculated on

Re: Are capital gain taxes calculated on the gross profit or would it be on the amount we received after deducting the closing costs and brokerage commissions etc.?

Critter-3 — Mon, 21 Dec 2020 23:06:23 GMT

It is on the NET profit not gross ... Sales price - (purchase price + cost of purchase + cost of sale + improvements if any ) = net profit

Re: Are capital gain taxes calculated on the gross profit or would it be on the amount we received after deducting the closing costs and brokerage commissions etc.?

DoninGA — Mon, 21 Dec 2020 23:06:41 GMT

600k (-) 40k (-) 500k = 60k Capital Gains

Re: Are capital gain taxes calculated on the gross profit or would it be on the amount we received after deducting the closing costs and brokerage commissions etc.?

Critter-3 — Mon, 21 Dec 2020 23:14:21 GMT

Don't forget the cost to purchase and any improvements if any were made ... folks always miss these items.

Re: Are capital gain taxes calculated on the gross profit or would it be on the amount we received after deducting the closing costs and brokerage commissions etc.?

NCperson — Tue, 22 Dec 2020 01:17:08 GMT

@piyushbk - what was the reason you sold after 13 months? there are some rules (e.g. move for a job) that could reduce / eliminate the capital gains tax on a personal residence.

Re: Are capital gain taxes calculated on the gross profit or would it be on the amount we received after deducting the closing costs and brokerage commissions etc.?

piyushbk — Tue, 22 Dec 2020 15:35:55 GMT

Yes the reason was job move. Does it help in reducing/eliminating capital gains even if the duration stayed is only 13 months or should it more than 2 years.?

Re: Are capital gain taxes calculated on the gross profit or would it be on the amount we received after deducting the closing costs and brokerage commissions etc.?

NCperson — Tue, 22 Dec 2020 15:49:51 GMT

yes it does.

Read this:

https://www.irs.gov/pub/irs-pdf/p523.pdf

and specifically, the left side of page 6:

Work-Related Move
You meet the requirements for a partial exclusion if any of the following events occurred during your time of ownership and residence in the home.
• You took or were transferred to a new job in a work location at least 50 miles farther from the home than
your old work location. For example, your old work location was 15 miles from the home and your new work
location is 65 miles from the home.
• You had no previous work location and you began a new job at least 50 miles from the home.
• Either of the above is true of your spouse, a co-owner of the home, or anyone else for whom the home was
his or her residence.

Assuming you meet the eligibility test for the partial exclusion, then complete the worksheet on page 7

If you are eligible for the partial exclusion, then it should work out that 13/24 * $500,000 or $270,000 of gain is tax free...

Re: Are capital gain taxes calculated on the gross profit or would it be on the amount we received after deducting the closing costs and brokerage commissions etc.?

Critter-3 — Tue, 22 Dec 2020 15:58:13 GMT

IMPORTANT ... even if you can exclude the sale it MUST be reported since you will have a 1099-S issued so you MUST MUST MUST check that box in the program or you will get a nasty IRS letter later.

Re: Are capital gain taxes calculated on the gross profit or would it be on the amount we received after deducting the closing costs and brokerage commissions etc.?

piyushbk — Thu, 14 Jan 2021 20:23:18 GMT

Yes it is due to change in job; thanks @NCperson that is good to know.