CALCULATING CAPITAL GAINS TAX WHEN SELLING A HOME
Capital gains are the difference between the purchase price of a property and the price you sell it for. Capital gains tax apply to certain types of sale, usually income properties, and refers to what you pay on that difference, after adjusting for a variety of exemptions, deductions and tax breaks.
The tax on capital gains income is calculated separately from the tax on your regular income and often at a different rate. In Florida the tax rate is usually 20%.
Sale Price - Purchase Price - Closing Costs - Upgrades = Capital Gain
Capital Gain x 20% = Capital Gain Tax
Take the purchase price of your property and add the cost of any improvements. This applies only to substantial improvements that add to the home's value, not to repairs. Fixing a leaky shower isn't a capital improvement, but replacing it with a newer, better shower would be.
If you've been billed with a special assessment for neighborhood improvements you can count those too.
Take your sale price and adjust for sale expenses. If you sell a property you can subtract the costs of your real estate agent's commission, legal fees and any closing costs you agreed to pay.
Look at how long you've held the property. Be aware that short-term capital gains (property that was sold less than a year after you bought it) are taxed at the same rate as regular income, while long-term gains get a lower rate.
REFERENCE: SFGate
