Capital Gains Tax
When it comes to investing, doing home projects, creating equity in your house, or fixing up a flip house, it's incredibly important to understand the tax codes to make sure your effort is worth the return!
Here's the definition of capital gains:
Capital gains are profits made from the sale of real estate, investments and personal property. ... Short-term capital gains refer to profits made from selling assets owned for one year or less, while profits earned on assets owned for more than one year are considered long-term capital gains.
The tax rate charged on long term vs short term capital gains varies and can make a substantial difference in your net return on investment.
Here’s the cool part about capital gains tax for the do-it-yourselfer on your personal residence:
If you live in a house as your personal residence for 2 out of the last 5 years, you don’t have to pay a capital gains tax unless you exceed profits in excess of $250k as a single and $500k as a married couple. So in theory, you could buy a house, fix it up and sell it every 2 years and not pay a dime in tax on the gain. A HUGE win!
This is a great article that explains the particulars on this tax a little more in depth:
https://www.investopedia.com/ask/answers/06/capitalgainhomesale.asp
Where else can you keep the full return on your investment and not have to pay the government a slice of the pie?
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