Understanding Capital Gains in Real Estate When you sell a stock, you owe taxes on your gain — the difference between what you paid for the stock and what you sold it for. The same holds true when selling a home (or a second home), but there are some special considerations. How to Calculate Gain In real estate, capital gains are based not on what you paid for the home, but on its adjusted cost basis. To calculate, follow these steps: 1. Purchase price: _______________________ The purchase price of the home is the sale price, not the amount of money you actually contributed at closing. 2. Total adjustments: _ ______________________ To calculate this, add the following: Cost of the purchase — including transfer fees, attorney fees, and inspections, but not points you paid on your mortgage. Cost of sale — including inspections, attorney fees, real estate commission, and money you spent to fix up your home just prior to sale. Cost of improvement...
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