Need to know how to figure out your capital gains after foreclosure rehabilitation? If you searched for this phrase, the answer is probably yes. For most of us, the answer is no. The Internet searcher using this keyword phrase does want to know. Although many people think that the phrase capital gains applies only to the rich, that is not so. It is a fancy word for a simple concept.
- Understand what a capital gain is. If your net worth increases on things like real estate, a bank account, or the stock market, you have had a capital gain. This can also be true for antique cars. Basically, if your net worth increased, you may have to do some more paperwork for Uncle Sam.
- Determine the value of the home when you bought the foreclosed property or went through the rehabilitation. Current federal programs may keep a person in the home to avoid foreclosure. Contact a real estate assessor to get a fair estimate. Most Realtors can help a homeowner find a professional in this area.
- Deduct the value of the home before the rehabilitation from the value after. If the number is higher, you have made a capital gain and must report this on next year’s taxes. Not everyone will have a capital gain from a foreclosure rehabilitation. Losing money in today’s real estate market is a possibility. If a homeowner loses money, he can deduct the loss on his taxes. This, quite simply, is how to figure out a capital gain in this circumstance.
The reader probably thought that the large words would require a long explanation, but figuring out your capital gains or losses is simple. Finding out how it affects your tax bill requires a professional accountant.