Capital Gains Tax When You Sell Property | What happens when Interest rates go below 6%

 




 


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Introduction to Capital Gains Tax

Capital gains tax is when you sell a property. 

Primary Residence Tax Exemptions
Now, if it's a single family, if it's your primary residence throughout the United States as it stands right now, this is not legal advice, tax advice, talk to your tax person. You get a tax exemption of up to two people for $250,000 each. That means two people up to $250,000 each.

As long as you're on title. That way, you get that tax exemption. So if your parents bought a house in the 1970s for $70,000 and now it's worth $2 million, you get to step up your tax basis $500,000 on top of any improvements that your tax person will allow.

So the rest of it's capital gains, and there are stipulations, right? 


Short-term vs Long-term Capital Gains

So if you own it less than two years, then you have to pay, short term capital gains, tax rates which is basically your income level at the tiered rates system that we have.

Anything after two years, you get the long-term Capital gains tax rates usually apply to assets held for more than a year. A lot of people qualify for a 0% rate, but depending on your income and filing status, you might pay 15 or 20%. 




Tax Strategies and Write-offs

There are other ways of getting around that, like forming an LLC, starting your own little business, getting some massive write-offs, and doing that kind of thing.

If you have a business, you can do something called Section 179, I think it's called, where you can buy a big car like a big Chevy Tahoe, Suburban, or anything that's over 6,000 pounds. Curb weight. You can write that off in the first year. As long as it's a business. If you're an employee or a W2, then there's nothing really you can do about it.

You can write that off over five years or something. Or there are different ways of doing it. Don't forget, you get write offs on improvements that you do. Now, if you replace a roof, that's a catch-22. You have to do it 'cause it's a maintenance thing. It's not really replacing it for any aesthetic reason.

Unless you decide, go from comp to cement, tile roofs, or what have you. So there are certain things you should always talk to your tax person about. Hey, I'm thinking about putting the Tesla solar on my roof. What do you think? Yea,h if you buy it, you get to do that. If you lease it, you get to do that.

So all sorts of stuff. 





House Flipping and Tax Implications

If you're a house flipper, you are going to pay short-term capital gains tax on it. Always, I sit down with people and I show 'em the spreadsheet and I have this little cost basis thing. But there it says, you always have to talk to your tax person to make sure, because I'm talking general terms and your tax person will be more specific and he'll tell you, he or she will tell you what you can and cannot get away with or should not get away with.

Okay. That said, earlier this week, I mentioned the fact that. 





Inheritance and Step-up in Tax Basis

You can, if you're the parent who's living in their house since the seventies, they bought it for $70,000 and now it's worth $2 million. If one of the parents passes away, you get a step-up in tax basis for the day that person died.

For example, I just sold a house in Hollister, and the parents passed away, March this year. So when you look at it, you get to take that thing. So I do a mini appraisal, or what I call a comparable market analysis, and I give that to you so you can take that to your tax person.

You can get a full appraisal, which would cost you seven or $800, depending on your tax person. They may or may not accept my mini appraisal. The other thing, too, is you can move out of it and rent it for two years, and then you can transfer that tax basis to another property through a 10 31 exchange.

Again, it's not tax advice. This is something where you would actually have to call somebody and make sure it makes sense for your scenario, for your income estate. In the tax scenario, I am not giving advice. This is just stuff that you have to be aware of when you strategically place stuff into the house. 





California State Tax Considerations

There's California state tax. If you take over your parents' house after they pass on and you sell it, you'll have to pay capital gains tax there as well. In California, 'cause it was not your primary residence. There are all sorts of little stipulations that you have to do, but again, make sure you talk to your tax person.

It'll cost you a hundred, 200 bucks. It'll save you thousands. Okay. All right. 




Home Inspection Checklist
This segment of this episode is brought to you by the home inspection checklist. Make sure you download this. Even if you're thinking about selling in three years, because what you want to do is get all those repairs done. Do not think that this is a replacement for a professional home inspection.
There is no way it will take over from that, but you should have a checklist of things to do and to repair and fix. So there you go. All right. 




Real Estate Market Overview
What you get for $2 million in Santa Clara County is this. Sorry, got my earphones here. $2 million, four bedroom, two bath, 2065 square feet.

Built in 1959. And this is in Cambrian Park. Cambrian Park is between Willow Glen and Almaden. So if you're looking at something that's not super, super expensive, this one, I don't know, God, it feels like they took pictures with their iPhone and they just lightened it and it doesn't have a floor plan and pretty mediocre, a set of photos there.

But that's what you get for $2 million in Santa Clara County. $2 million in. Knoxville, Tennessee, or Henderson, Nevada, gets you a whole lot more. So, The reason why I'm putting these things out, this is what you get for a million dollars in San Jose, Santa Clara County, Millstone Lane, not by listing $990,000, just put on the market.

Three bedroom, two and a half bath, 1,451 square feet, built in 1988. The sucky thing about this is it's. In an HOA. So this is the Deer Run area?

Yep. This is Chinwe and Hayes. And then this is Frontier Village, but this is an HOA. You pay a hundred and. $16 a month. Let's take a look inside, see what the pictures look like. So the cool thing about this is nicer homes, right? Semi-newer. Don't forget this is 1988. So they painted the counters, put in a new dishwasher, but left the old stove and microwave with the black.

I always recommend if you're gonna. Do one, make 'em all stainless steel. Because look at this picture right here is mismatched. You have stainless steel, you have a black and white oven and stove, and microwave, and then a white refrigerator but some million bucks. Kinda like the same thing as buying a house for $500,000 in Nevada.

So there you go. I like the number of pictures. Everything's white and bright. You can tell that these are professionally taken photographs. They have drone pictures taken, which is nice. And there's a layout. That's nice. I love that they put the layout. Guys, tell you, this is 2025. If your agent doesn't do floor plans, your agent is cheating out.

It is it. There's no reason for them not to have a floor plan, right? So good for you. Whoever this listing agent is, and fireplace, great room entry, kitchen, garage, and all the living spaces are upstairs. It looks pretty tight. Feels pretty tight, but that's what you get for a million dollars in Santa Clara County.




Impact of Interest Rates on Real Estate
Rates today have gone up just a bit. We're under 7% still for Jumbos, 6.95, and 30-year VA is 6.25. And lemme see if I can jump these options up for you. $2 million. 'Cause that's our average is now $2.3 million. And assuming you have great credit, $400,000 down. Your payment would be $9,800 a month, and you're close to 6.33.
And like my title said in this video, this is what happens when the rates go below 6%. I use this as, yeah, this is the way things are right when rates go down. Buyers come out of the woodwork, and there's a whole lot more competition. So my suggestion to you is if you're thinking about buying, do it sooner rather than later, unless you're afraid that the market's gonna collapse like it hasn't in the last 18 years.

But we're actually, yeah, we're getting close to 20 years now since 2000. It's down trash. So this right here, guys, is just this perfect analogy, right? Rates go down, and all of a sudden, a firestorm happens. You have multiple comp offers, you have super bidding, it's a firestorm, and you are following everybody.

It's like little league soccer where you're, you start off, all the kids start off playing their position, and the ball goes over to the top, right? And all the kids rush over to that ball, and then the ball goes over here to the bottom left, and all the kids rush over there. That's exactly what real estate is when the market is this crazy. 



Inventory And Supply Charts
Current Market Conditions and Trends
It's not crazy right now. There's very little supply, very steady demand. Houses are still selling pretty quick. And here's the proof. This is February. Next week we'll have. The March numbers come in and we'll adjust this a bit. And we're all below six months.
if you've been following me, you know that six months is about the mark where it shows that it's a buyer's market. Like here in Napa, we're showing it's a buyer's market, but it's really two or three months like being in a recession. And here's a good look at Santa Clara County single-family homes.
The consumption months of inventory versus the number of active. Okay, this is just a good showing of we're nowhere near six months and we're nowhere near 1000, for Santa Clara County. We need to beat about 2000 homes for sale, plus or minus 200 to make it a balanced market. And these are the cities right here.

So you can see here, I think this is Los Gatos.

No, this is Marin. Yeah, Los Gatos is up, but that's 'cause most of Los Gatos is in the fire territory or fire zone. So I'm sure will come down by the end of next month. All right. 




Conclusion and Final Thoughts

That's it for now. Thanks for watching. Have a great weekend. I'm Vito with Abano. We'll see you out there. 


Vito Scarnecchia


Real Estate Broker, Veteran, Dad

DRE#: 0140767

408-705-6817

Vito@abitano.com

Update your home value: https://hmbt.co/bT7qRJ      

FREE DESKTOP APPRAISAL https://www.propertyrate.com/agent/vitoscarnecchia

If you are moving ANYWHERE in the world, Let me know! I know a LOT of AMAZING Agents!

🔴 Willow Glen's five most expensive homes https://youtu.be/3A_E2ck0ePg




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