Investment Property Taxes Capital Gains – What Fort Myers Investors Should Know

If you’re a real estate investor looking at selling a property, or if you’re thinking of buying a property now and thinking long term about selling it, then you might be worried about what taxes you’ll incur. In this blog post you’ll read about investment property taxes capital gains – what Fort Myers investors should know about capital gains.

Prior to delving into the details, it’s important to note that the information presented here is intended for a broad audience, encompassing readers situated both inside and outside of FLORIDA. Additionally, individuals may have varied corporate structures and other unique factors. While we offer a helpful overview, it is imperative that you consult with an accountant and tax attorney before arriving at any conclusive decisions tailored to your specific circumstances.

Different Types Of Tax For Different Types Of Income

There are different types of tax for different types of income. For example, straight income that comes in from a job might be taxes as regular income at your regular tax rate. But other types of income may be taxed at a different tax rate. For a stock market investor, for example, income derived from dividends have their own tax rate. And for real estate investors, you should be aware that income derived from capital gains on the sale of a property has its own tax rate.

What Are Investment Property Taxes Capital Gains?

Let’s return to the fundamentals: When you acquire a property, you invest a certain amount, and upon selling, you receive the amount the next buyer pays. The disparity between the purchase price and the selling price constitutes the capital gain. For instance, if you bought a property for $100,000 and sold it for $125,000, the capital gain stands at $25,000, and this is the income subject to taxation at the capital gain rate.

Why Do Capital Gains Have A Different Rate?

Capital gains tax rates are usually less than the rate you pay for your regular income. There are a couple of reasons why capital gains are taxed differently: one of the reasons is because the gain can be quite substantial on a piece of real estate so a normal tax rate can be quite prohibitive to pay, so a capital gains tax rate is like keeping extra money in your pocket. The other reason is because the government wanted to encourage the buying and selling of assets (which is good for the economy) so they provided an incentive (a lower rate) to do so.

Capital Gains On Investment Property Versus Your Primary Residence

It’s essential to note that the treatment of capital gains on your residence (the house you live in) may differ from that of other properties you own. Crucial factors influencing this include whether it’s your primary residence, the duration of your occupancy, or if it’s a secondary property (e.g., a cottage) or an investment property like a rental. Given the unique circumstances for each individual, it is advisable to consult with a tax attorney to gain insights tailored to your specific situation.

If you want to know more about real estate investment properties, or if you want to get introduced to a good tax attorney who can help you optimize your tax situation, click here to enter your information, or pick up the phone and call (239)360-3176.

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