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What are Real Estate Gains?

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  • Written By: Malcolm Tatum
  • Edited By: Bronwyn Harris
  • Last Modified Date: 17 March 2018
  • Copyright Protected:
    2003-2018
    Conjecture Corporation
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Real estate gains are capital gains associated with the purchase and sale of real estate properties. As with all types of capital gains, a real estate gain has to do with the amount of profit that is made when an acquired asset is sold. Properly calculating the profit realized from the sale of a house is important, as that amount will be subject to taxes.

In determining the amount of real estate gains that are subject to taxes, it is important to consult current tax laws that apply in the country where the transactions take place. The reason for this is that in some countries any expenses associated with the sale of houses that are absorbed by the seller can be deducted from the gross profit generated by the deal. However, that is not necessarily true in every country around the world.

For this reason, it is important to understand whether the taxable real estate gains involve the gross profit from the sale or the net profit. Unless this aspect is investigated, there is a good chance of either overpaying or underpaying the tax burden. While it is likely to be an easy task to recover an overpayment, it does mean that you cannot make use of that money until it is recovered. In the event of any underpayment, this could lead to incurring penalties and interest that would wipe out a substantial amount of the profit from the sale.

When adjustments are allowed under the terms of current tax law, the amount of taxable real estate gains may be reduced by several factors. All or a portion of the expenses involved with any capital improvements made by the seller may qualify as an adjustment. If the seller absorbs the closing costs for the sale, that amount may also be exempt from taxation. If certain types of depreciation related to home value are allowed and can be proven to apply to the property, these can also be utilized to reduce the amount of real estate gains subject to taxes.

While there is a good chance that the difference between the original purchase price and the sale price may constitute the taxable real estate gains, it is always a good idea to look for any type of tax laws that would help to reduce the amount of taxes owed. For this reason, it is recommended to seek the services of a tax professional in order to make sure you pay no more and no less than the amount of taxes on the real estate gains that is required under current tax laws.

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