When do I pay capital gains tax?
My sister and I sold our two condos in August of 2017. Each condo sold for $170,000. We bought a condo for $270,000 with 20 percent down. When do we pay capital gains tax?
In general, you owe capital gains on the difference between net proceeds ($170,000 less brokerage and closing costs) and your cost basis. If one or both condos were rented as investments the calculation may be a bit complicated (depreciation, capitalized improvements, etc.) so consult your CPA. But tax will be owed for the year in which you sold.
The exception is that the first $250,000 of gains on a home is tax exempt if that house was your primary residence for 2 out of the past 5 years. If these two condos were the primary residences for you and your sister, then you will not owe capital gains tax at all.
The fact that you bought something else is irrelevant.
In regards to timing, you pay capital gains when you prepare and file your taxes.
The sale price and purchase price does not affect the date of when they must be paid. Since you included these dollar amounts in your question I’m wondering if you are questioning whether you will have gains and how much they may be. If that is the case, the question doesn’t have enough of the facts listed.
If you need assistance calculating the possible gain I’d recommend contacting a reputable Enrolled Agent or CPA. If you find a reputable person it may be worth the out of pocket investment.
Best wishes to you!
Some good news for your. If you each lived in your own condos for 2 or the past 5 years you should owe any capital gains on the profit from your condo sales. If you are single you get a $250,000 capital gain exclusion on your property. The new purchases doesn't play into whether you owe capital gains or not on the previous properties.
Capital gains on the sale of your home are due the tax year you sold your property. So last years sale are due with your 2017 income taxes. If you lived in the condo for 2 of the last 5 years, then based on the capital gains you would pay no taxes. You have a $250,000 capital gains exclusion for each of you. Your capital gains will not exceed the exclusion, so no taxes owed.
Capital gains are always paid in the year for which anything is sold, whether it is stocks, bonds, real estate, collectibles, or anything else. So as you are preparing your 2017 taxes, you will have potential capital gains on your two properties for 2017.
You didn't say who owned each condo, whether it was singly or jointly owned, how much you or your sister paid for each one, whether these were owner-occupied or rented out, your other expenses, and so on. All of that information is required to compute the potential capital-gains tax. In general, if you are single then you get a 250-thousand-dollar exclusion if you lived in the property for at least 2 out of the last 5 years, and 500 thousand if you are married. Often this results in zero tax. Also, whether you lived in the condo or not, you can deduct improvements in the property from your net gain.
Whether you bought a different condo later on is irrelevant. That would only matter if you did a like-kind 1031 exchange which is unlikely in your case.