Understanding Capital Gains in Real Estate
When you sell a stock, you owe taxes on your gain - the difference between what you paid for the stock and what you sold it for. The same holds true when selling a home (or a second home), but there are some special considerations.
How to Calculate Gain
In real estate, capital gains are based not on what you paid for the home, but on its adjusted cost basis. To calculate, follow these steps:
- Purchase price: _______
The purchase price of the home is the sale price, not the amount of money you actually contributed at closing.
- Total adjustments: _______
- Your home's adjusted cost basis: _______
- Your capital gain: _______