Ask Roxy is a public service blog from the Law Offices of Roxanne Sher Olson (www.roxanneolson.com). Roxanne is an attorney in Santa Cruz, CA. Email your questions to askroxy@roxanneolson.com
The rules around capital gains changed dramatically for 2013 so I’m glad you are asking this question now. I will break it down into separate questions:
What is Capital Gains?
When you sell you home at a profit the IRS considers the profit “capital gains” rather than “ordinary income” such as the income you receive in your paycheck. Capital gains are taxed different than ordinary income. So, if you purchased the house for $100,000 and you sell it for $500,000 you have earned $400,000 in capital gains.
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