We hate to be the one to have to break it to you, but yes, you are required to pay capital gains tax on selling a house in Arizona. However, if you will be required to pay, and how much you will be required to pay all depend on a certain number of variables. They are discussed below, but first, what is capital gains tax?
What Is Capital gains tax?
In the simplest words, capital gains tax is a fee that you are required to pay to the government for the sale of certain types of assets such as real estate and stock investments.
The current federal policy states that capital gains taxes can be collected only from the sale of assets that have been held for over a year. This means that assets purchased and sold within the timeframe of a year will be taxed only as ordinary income.
The rates for long-term capital gains taxes are 0%, 15%, and 20%, depending on the tax bracket the owner claimed while filing their tax return for that year.
How do I calculate my capital gains?
From the total purchase cost of the home, subtract the amount you spent on renovations, closing costs, agent fees, etc. from the amount you will make from the house sale. The result is your capital gain, and if this figure is in the negatives, it means you have lost money.
Capital gains tax on selling a house in Arizona- the breakdown
In Arizona, if the home is listed as your primary residence and you have lived on the said property for at least two years out of the last half-decade, then you may not be required to pay any capital gains tax on selling a house.
If, on the other hand, the home is listed as your primary residence, however, you have lived in it for less than two out of the last five years, then you will most likely be liable for capital gains tax.
If you live alone, then the first $250,000 you make will be exempt from capital gains taxes. This means that you may be able to avoid paying this fee altogether if your home sells for less than $250,000. For married couples, on the other hand, the first $500,000 recovered from the home sale is tax-exempt.
Can I avoid capital gains taxes in Arizona if I rented my house out?
No. to meet the requirement, you, who has the house listed as their primary residence must have lived in it for a cumulative total of two years.
Remember, you don’t have to have lived on the property for two years at a stretch. You can calculate the number of times you stayed at the house within the last five years, and if the number adds up to 24 months or more, then you may be able to avoid capital gains tax on selling a house in Arizona.
Note that Arizona utilizes the same equation used to calculate federal capital gains on the sale of a house. Additionally, you can only claim a capital gains tax exemption once in two years. Meaning that if you sell two primary homes at the same time, for example, you will be required to pay capital gains tax on one of them even if you meet the requirements for capital gains tax exemption on both houses.
Selling your home with Tgaz Investments LLC
When it comes down to selling your house, there is no guaranteed way to completely wiggle out of the capital gains tax on selling a house in Arizona. However, we have a much better option for you.
Our unique buying model helps you sell your house as it is, without the need for expensive stagings, repairs, commissions, or other closing costs. This greatly reduces the amount you will have to pay when selling your house.
We will buy your house (regardless of whether you have a loan or not) the way it is and take care of the rest. This way you potentially avoid spending thousands of dollars on the sale. This means that you not only get more value from the sale of your house but that you also have some extra change to put towards getting settled elsewhere.
Get on the phone with Tammy today by calling (337)-227-9200.