When Selling My House What Taxes Do I Pay?
Are you planning to sell your house soon? If you have enough equity in the property, selling is a great way to make a substantial profit. But don’t overestimate that potential profit by forgetting to factor in the taxes you must pay!
A hefty net profit from the sale of your house can certainly be exciting, but for some homeowners, that profit might also bring on a sizable tax bill. For others, however, no taxes are required. What determines the taxes you pay when selling your house? The experts at We Buy Houses Oklahoma City have the details below.
Selling Your House: 3 Types of Taxes to Consider
If you make a profit on the sale of your house, understand that you may be responsible for paying the following types of taxes:
- Property tax
- Capital gains tax
- Real estate transfer tax
Because tax exemptions and personal circumstances impact your liability for each of these tax types, you may not be liable for paying all of the above. Below, we’ll cover what you need to know to determine which taxes you must pay on the sale of your house.
Who Pays Property Tax When Selling a House?
Every homeowner who sells a house must pay property taxes. When you close on the sale, you’ll pay a prorated portion of the property tax you’re normally required to pay. Since property taxes are typically calculated and charged on a semi-annual basis, you’ll likely pay only the prorated portion of your six-month tax bill.
Your buyer will then take over all required property tax payments after they take possession of the property. Keep in mind that property taxes are calculated on a state-by-state basis. If you’d like to estimate your projected property tax payment on the sale of your Oklahoma City house, check out ok.gov for more information.
Who Pays Capital Gains Tax When Selling a House?
Not every homeowner is liable for paying capital gains tax on the sale of their house. If you qualify for a special circumstance or exemption, you can minimize or even eliminate the capital gain taxes you’d normally be required to pay on your profit.
Who Qualifies for a Capital Gains Exemption?
Homeowners who have lived in their house for at least two out of the last five years can qualify for a capital gains tax exemption. To qualify, your profit on the sale cannot exceed $250,000 if you’re a single filer or $500,000 if you file jointly.
If your profits exceed the amount to qualify for a capital gains tax exemption, your tax rate will vary based on your income bracket and the amount of time you’ve owned the property.
It’s important to note that even if you don’t qualify for a complete capital gains tax exemption, certain circumstances may allow you to be eligible for a partial exemption. This means that you can reduce your capital gains tax liability by a certain amount, which is calculated based on the percentage of time that you lived in your home over the past two years. The following special circumstances may allow you to claim a partial capital gains tax exemption:
- You had to relocate due to a job change.
- You had to relocate due to a divorce.
- You had to relocate because you had twins or triplets.
- You had to relocate because your spouse died.
- You had to relocate due to health issues.
When you close on the sale of your home, if you receive a Form 1099-S: Proceeds from Real Estate Transactions, you’ll generally be liable for at least some capital gains tax. If you think you might qualify for an exemption or special circumstance, it’s best to consult a professional to determine whether you must file the required IRS forms.
Who Pays Real Estate Transfer Tax When Selling a House?
Most homeowners must pay real estate transfer taxes when they sell a house. These taxes are also referred to as government transfer taxes or title fees. The amount you sell your home for determines how much transfer tax you must pay since this tax is calculated as a percentage of the final sale price.
Transfer tax rates can vary on a state-by-state basis and from city to city within the same state. In some locations, no transfer tax is required on the sale of a house. If you’d like to estimate your transfer tax payments on the sale of your Oklahoma City house, check out “Information on Buying and Selling a House” at ok.gov.Need to sell your house fast? At We Buy Houses Oklahoma City, we buy houses in any condition, for cash, and we can close on the sale in a matter of days. Ready to find out how much we can offer you for your home? Give us a call at (405) 757-2507 or contact us online to get started!