Income Tax vs. Capital Gains tax?

General Real Estate Investing
1

Hi All:

Last year I sold a property that I owned for 3 months. Someone told me that I would have to pay income tax instead of capital gains because I owned it less than 6 months. They said income tax is charged at a higher percentage. Is this true? Please clarify.

Thanks
dlmcgill

2

You’ll pay short term capital gains tax,which is taxed as ordinary income on assets held less than a year.

Anything held over one year is considered long term and taxed at a flat 15 percent,plus any state taxes that apply.

Kevin

3

Thanks for your response Kevin. And of course that short term capital gains can be offset by repair expenses, correct?

dlmcgill

4

Yes,by all means.Other losses you may have,excluding this property will also offset your gains and hopefully place you in a lower tax bracket.Good luck!

                         Kevin