Investment Property Taxes Capital Gains – What Montgomery Alabama Investors Should Know

If you’re a real estate investor looking at selling a property, or thinking about buying now and planning long term, you might be worried about what taxes you’ll incur. Here’s an overview of investment property taxes and capital gains that Montgomery, Alabama investors should know.

Note: This information is a general overview. Always consult an accountant and tax attorney before making any final decisions.

Different Types Of Tax For Different Types Of Income

There are different types of tax for different types of income. Income from a job is taxed as regular income. For real estate investors, income derived from capital gains on the sale of a property has its own tax rate.

What Are Investment Property Taxes Capital Gains?

The difference between the price you bought the property for and what you sold it for is the capital gain. For example: buy for $100,000, sell for $125,000 — the capital gain is $25,000, and that income is taxed at the capital gains rate.

Why Do Capital Gains Have A Different Rate?

Capital gains tax rates are usually less than the rate you pay for your regular income. The government provides this incentive to encourage the buying and selling of assets, which is good for the economy.

Capital Gains On Investment Property Versus Your Primary Residence

Capital gains on your residence may be treated differently than investment property such as a rental. Factors include whether you live in the house and for how long. Talk to a tax attorney as the situation will be different for everyone.

If you want to know more about real estate investment properties, contact us or call (334) 384-8887.