If you are selling an investment or business use property, you should consider a 1031 exchange. Generally speaking, a 1031 exchange allows you to defer capital gains tax at the federal and state level, depreciation recapture tax, and net investment income tax when you sell an investment or business use real estate and reinvest those proceeds into another business or investment use property. If that isn’t compelling enough, wait until you see your potential benefits by calculating your various tax totals and deferral potential.
How to Calculate Capital Gains Tax
Many people ask, how is Capital Gains Calculated, the Capital Gains Tax Calculation is as follows: Sales Price – the TOTAL of Original purchase price (cost basis) + improvements to the property + selling expenses = Total Capital Gains
Federal Capital Gains Tax = Total Capital Gains multiplied either 15% or 20% depending on your annual household Income. Currently for persons married filing jointly the 20% rate would begin on income of $517,001. Remember the sale of the property itself is considered part of the income.
State Capital Gains Tax = Total Capital Gains multiplied by your State Capital Gain Tax Rate which varies by state.
How to Calculate Your Potential Tax Benefits with a 1031 Exchange
