TAX Matters: Capital gains tax & tax exemptions

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Move Realty Co.'s commitment to you!

Buying and Selling a property can be an exciting time, but it's important to be aware of the potential tax implications. Taxes are a key consideration for homeowners and investors alike. At Move Realty Co., we want to ensure you're informed every step of the way. Here's a breakdown of what you need to know:

What are Capital Gains?

Capital gains are essentially the profit you make when you sell an asset, in this case, real estate. It's the difference between what you sell the property for and your basis in the property. Your basis is generally the original purchase price, plus any eligible improvements you've made.

Federal vs. State Taxes

It's crucial to understand that capital gains taxes are primarily federal taxes. The State of Georgia does not impose a separate capital gains tax. This is good news for Georgia property sellers! However, you will still need to report your capital gains to the IRS (Internal Revenue Service).

Tax Rates

Federal capital gains tax rates vary depending on your income level and how long you've owned the property.

• Short-term capital gains: If you owned the property for less than one year, the profit is considered a short-term capital gain and is taxed at your ordinary income tax rate.
• Long-term capital gains: If you owned the property for more than one year, the profit is considered a long-term capital gain, which is generally taxed at a more favorable rate.

Exclusions

The IRS provides some significant exclusions that can help many homeowners minimize or even eliminate capital gains taxes:

• The Section 121 Exclusion: This is a major benefit for homeowners. You can exclude up to $250,000 of capital gains if you're single, and up to $500,000 if you're married filing jointly. 
  • To qualify, you generally must have owned and lived in the home as your main residence for at least two out of the five years before the sale.
  • You can generally use this exclusion multiple times, but usually not more than once every two years.

Important Considerations:

• Investment Properties: The rules for capital gains taxes can be more complex for investment properties.
• Depreciation: If you've taken depreciation deductions on a property (like a rental), this can affect your capital gains calculation.
• Tax Laws Can Change: Tax laws are subject to change, so it's essential to stay updated or consult with a tax professional.

Homestead Exemptions 

We understand that saving money on your property taxes is important. That's why we want to educate you about homestead exemptions, specifically  in our home state of Georgia. These exemptions can significantly reduce your property tax burden, making homeownership more affordable.

What is a Homestead Exemption?

A homestead exemption is a benefit that reduces the taxable value of your primary residence. By reducing the taxable value, you lower the amount of property taxes you owe. In Georgia, there is a state-wide exemption, and counties and cities may offer additional exemptions.

Eligibility

To be eligible for a homestead exemption in Georgia, you must generally:

• Own the property
• Occupy the property as your primary residence

How to Apply

Homestead exemption applications are typically filed with the tax commissioner's office in the county where the property is located. Deadlines for applications vary by county, so it's crucial to check with your local office. Here is the state site https://georgia.gov/apply-homestead-exemption

For individual county info, click here:

https://dor.georgia.gov/county-property-tax-facts