Friday, January 28, 2011

TAXES- Will I have to paid taxes on land I had for three years and sold it TODAY.?

I plan to sell 2.5 acre lot I brought for a future home three years ago, but I change my mind on it location. I brought it for $16000, and if it sells for $20-$21000. WILL TAXES HAVE TO BE PAIDED if I make a profit, after I paid the realtor six percent and hundreds of dollars I PAID on INTEREST at my bank in the last three years???


There are two types of taxes that can affect a property. Ad Volerem taxes (property taxes) and or Capital Gains Taxes. You never resided on the property because it is a vacant lot. By not developing it as a residence you may fall under the IRS guidlines that would then cause that property to be deemed an investment type property. If so, you then become subject to Capital Gains taxes.

Capital Gains taxes are a federal tax (IRS) and are levied in addition to your local property taxes.

You can deferr capital gains taxes when selling an investment property by performing an IRS 1031 Tax Deferred Exchange. This is where you sell a property with the intent of buying a "Like Kind" property to replace it. The "Equity" you have in the current property is then rolled over into the new, replacement property. Contact an attorney, a Realtor or a "Facilitator" for more information.

Yes if it was not your primary residence

if you have paid your property tax every year for the past three years then no but i'm not certain for sure if you haven't paid them what will happen...you'll probably have to pay though...go to the sheriff's office in your county and talk to them about it...thats who handles all that stuff...and no it does not matter whether your home was on the property or not you still have to pay property taxes if you own land

Yes you will be taxed on the difference of what you get less what you paid for the land and related selling costs (i.e. commissions). You should have been deducting the property taxes/interest all along while you owned the lot.

You will pay income tax on the taxable gain, if you don't complete the "like kind" exchange within a certain amount of time.

Property taxes you have paid this year, for the months that you owned the land (Jan to June, for example) will be a deduction for you. Not the previous years property taxes, only the year of the sale, and only for the months you have owned the property.

The previous years property taxes should have been a deduction on last year's return, and the year before that. I don't think you can't add them together and take them off this years return.

Mortgage interest is deductible but I don't think the interest on an ordinary loan that you used to purchase the land is deductible.

The realtor's commission is not deductible or but it is an expense that is used to calculate the taxable gain. The interest you paid on the loan to keep the property is not used in calculating the taxable gain.

To accurately figure your taxable gain, first calculate the basis of the property you purchased, the $16,000 plus the allowable costs of acquiring the property. Then figure the basis of the property you are selling, the $20-21000 minus the allowable costs of selling. The difference is your taxable gain.

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