Do I Need to Pay Capital Gains Tax When Selling My Home in Pasadena?
Do I need to pay capital gains tax when selling my home in Pasadena?
Answer:
You may owe capital gains tax when selling your Pasadena home, depending on your profit, how long you’ve owned the home, and whether it was your primary residence.
May Kunka explains the basics and why you should consult a tax professional before selling.
What Is Capital Gains Tax?
Capital gains tax is a federal tax on the profit from selling an asset like real estate.
It’s calculated by subtracting your home’s purchase price (plus improvements) from the sale price.
If the result is a gain, you may owe taxes—unless you qualify for an exclusion.
Primary Residence Exclusion
Homeowners may exclude up to $250,000 of gain (single filers) or $500,000 (married filing jointly) from taxable income if:
You’ve owned the home for at least 2 years in the last 5 years
You’ve lived in the home as your primary residence for at least 2 of those years
If you meet these criteria, you likely won’t owe capital gains tax—no matter how much your home appreciated.
But it’s always best to confirm with a tax professional.
What About Pasadena Investment Properties?
If the home is a rental or investment property, the exclusion typically does not apply.
You might consider a 1031 exchange to defer taxes by reinvesting in another property.
This is a complex strategy—May Kunka can refer you to tax and legal advisors experienced with 1031s.
How Capital Improvements Affect Your Taxable Gain
Keep records of major home improvements like remodels, new roofs, or additions.
These can increase your cost basis and reduce your taxable gain.
Small repairs usually don’t count, but upgrades that add value or extend the life of your home do.
California State Taxes
In addition to federal taxes, California taxes capital gains as regular income.
Your specific tax rate will depend on your income bracket. A tax advisor can provide exact figures for your situation.
When to Talk to a Tax Professional
Before listing your home, review your potential tax obligations with a CPA or financial planner.
They can help estimate your liability, advise on recordkeeping, and explore strategies to minimize taxes.
Final Thoughts: Plan Ahead for a Smooth Sale
While many Pasadena homeowners qualify for exclusions, planning ahead is essential.
May Kunka will guide you through the sale while working alongside your tax advisors to ensure you’re fully prepared.
Ready to Discuss Your Selling Plans?
Reach out to May Kunka for a no-obligation consultation.
She’ll provide market insights and help you connect with trusted tax professionals before you list.