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Are you looking to sell a Chandler, AZ rental property? Basics of Short Term versus Long Term Capital Gains

by | Dec 2, 2021 | Blog | 0 comments

Are you looking to sell a Chandler, AZ Rental Basics of Short Term versus Long TAre you looking to sell a Chandler, AZ Rental Basics of Short Term versus Long Term Capital Gainserm Capital Gains
Are you looking to sell a Chandler, AZ rental property and are interested in understanding the difference between short term and long term capital gains? Well then this is the blog for you!

Short Term Capital Gains

 
If you have an asset such as real estate in Chandler, AZ and you bought and sold that property in less than a 12 month period that is considered a short term capital gain and is taxed differently than a long term capital gain. It would be taxed as ordinary income and the taxes paid on that short term capital gain paid would depend on the tax bracket you fall into when completing your taxes for that fiscal year (See Table 1: 2021 Income Tax Brackets and Rates).

Long Term Capital Gains

 
If you hold your investment property in Chandler, AZ for more than a year when you sell it you will pay long term capital gains instead of short term capital gains. Once the property officially is sold then the money made on that asset becomes realized gains and are subjected to the tax rates for that capital gain.  Table 2 will help you determine what your tax liability will be on the sale of that real estate asset.  Long-term capital gains tax rates for the 2021 tax year based on your Adjusted Gross Income*(AGI)
 

 Table 2: 2021 Tax Rates for Long-Term Capital Gains
  AGI AGI AGI
Filing Status 0% 15% 20%
Single up to $40,400 $40,401 – $445,850 Over $445,850
Head of Household up to $54,100 $54,101 to $473,750 Over $473,750
Married filing Jointly and surviving spouse up to $80,800 $80,801 to $501,600 Over $501,600
Married Filing Separately up to $40,400 $40,401 to $250,800 Over $250,800

 

(Your *Adjusted Gross Income is your gross income minus any itemized deductions you’re entitled to claim or the IRS standard deductions which results in your taxable income.)

Tax Example: Compare Short Term & Long Term Capital Gains

Short Term Capital Gain: Using the previous example, your realized gain is $111,000 and you bought and sold the property in less than a year. You earn an income of $55,000 a year at a W2 job, your short term capital gain tax liability (see Table 1) is shown in the example below:

$111,000 + $55,000 = $166,000 AGI

Single or Head of Household

32% tax bracket

$166,000 x .32 = $53,120 tax liability

Married filing jointly

22% tax bracket

$166,000 x .22 = $36,520 tax liability

 

Long Term Capital Gain: Using the previous example, your realized gain is $111,000 and you held the property for more than a year. You earn an income of $55,000 a year at a W2 job, your long term capital gain tax liability is shown in the example below:

$111,000 + $55,000 = $166,000 AGI

You would fall into the 15% capital gains tax rate (see Table 2) no matter what your filing status and will owe 15% of the $111,000 gain. What is owed on the W2 income is then based on your tax bracket per Table 1.

$111,000 x .15 = $16,650

Single or Head of Household

32% tax bracket

$55,000 x .32 = $17,600 + $16,650 = $34,250

Married filing jointly

22% tax bracket

$55,000 x .22 = $12,100 + $16,650 = $28,750

(For this example the numbers are simplified since taxes are done on a step up basis)

Comparison Single or Head of Household Married filing jointly
Short Term Capital Gain $53,120 $36,520
Long Term Capital Gain $34,250 $28,750
Savings $18,870 $7,770

 
This is a snippet from our book dedicated to helping landlords pay less in taxes when selling their Chandler, AZ rental properties. If you are wanting to learn all the ways Liz & Marie can help purchase your rental or take it over so you no longer have the headaches of tenants, toilets and termites check out our full book “How to Save $10,000 or more on Taxes when Selling your Rental Property” and video series here.

About Liz & Marie

Liz & Marie are the area’s leading real estate solutions company. We successfully work with homeowners, buyers, sellers, real estate agents, and real estate investors, buying and selling all types of residential real estate. We are confident that we can find the right property or solution for you, whether you have a house to sell, are looking to buy your next investment property, or are looking for your family’s “forever home.” We can share our knowledge so that you can make the best decisions for your situation and we are dedicated to making everyone’s experience a smooth and successful process.

Liz & Marie specialize in buying and selling your home at the price, and on the timeline, that works for all of us. Our extensive knowledge of real estate investing and a large network of real estate investors nationwide allows us to offer more buying choices and a wide variety of selling options for all types of home buyers and sellers, including financially distressed homeowners. Our mission is to work hand in hand with all parties and to handle every situation with the utmost professionalism and care.

We are thrilled to be a part of this next chapter in your life. Our commitment to excellence starts with treating you and your transaction with the utmost care and professionalism. We know that buying and selling a home is one of the biggest decisions you’ll ever make and we are humbled that so many homeowners choose us to join them on their journey. Let us lead the way and earn your business today.

We may be Crazy Liz and Wacky Marie but together we can do anything. Our combined experience in real estate has given us tons of lessons and has provided us the opportunity to help many homeowners! We are always striving to learn more and help others!
Let us know how we can help you today!

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