Taxes on real estate profits vary depending on the individual circumstances of each property. The following is a general guide to taxes on real estate profits in California, but please consult with your accountant or tax advisor for more specific information.
Taxes are calculated into each transaction and paid out of the money earned. The buyer pays most of the taxes through their agent, who also handles all legal paperwork for them. However, there may be other types of tax that you have to deal with on an individual basis and should first contact your state's department which will provide you with further instructions:
Sales tax - 6.25%
Capital Gains Tax Rate on Short Term Capital Gain - 3.75% for major California cities
Capital Gains Tax Rate on Long Term Capital Gain - 0% (for those who have owned the property less than two years)
General tax info: The federal government collects income taxes, while most states collect sales taxes and property taxes. Property taxes are applied to the sale price of a home, while sales tax is applied to both residential AND commercial properties. In California, there is an additional transaction fee that also goes to state level funding projects which ranges from 2-5% of the purchase price depending on where you live.
California State Property Taxes:
Counties in California impose property taxes based on the fair market value of a home, at rates set by each county. In most areas of California, the property tax rate is 1% of that assessed value. The tax is paid annually and billings are mailed out in October (or November if you're busy watching the Dodgers). There is a 1% tax on all real estate transactions.
Federal Income Tax:
Source of income: Active, passive or rental income from investment properties held for 2 years or less - Short term capital gains are taxed @ 15%. Long term capital gains are taxed @ 0%. This tax is not collected on existing homes located where the family lives full time.
Taxes are calculated into each transaction and paid out of the money earned. The buyer pays most of the taxes through their agent, who also handles all legal paperwork for them. However, there may be other types of tax that you have to deal with on an individual basis and should first contact your state's department which will provide you with further instructions:
Sales tax - 6.25%
Capital Gains Tax Rate on Short Term Capital Gain - 3.75% for major California cities
Capital Gains Tax Rate on Long Term Capital Gain - 0% (for those who have owned the property less than two years)
General tax info: The federal government collects income taxes, while most states collect sales taxes and property taxes. Property taxes are applied to the sale price of a home, while sales tax is applied to both residential AND commercial properties. In California, there is an additional transaction fee that also goes to state level funding projects which ranges from 2-5% of the purchase price depending on where you live.
California State Property Taxes:
Counties in California impose property taxes based on the fair market value of a home, at rates set by each county. In most areas of California, the property tax rate is 1% of that assessed value. The tax is paid annually and billings are mailed out in October (or November if you're busy watching the Dodgers). There is a 1% tax on all real estate transactions.
Federal Income Tax:
Source of income: Active, passive or rental income from investment properties held for 2 years or less - Short term capital gains are taxed @ 15%. Long term capital gains are taxed @ 0%. This tax is not collected on existing homes located where the family lives full time.
