Knowing the nuances related to buying or selling a residential property in New York can help ensure that you pay as little in taxes as possible. One example of these consequences can be seen by examining a transaction involving a house that’s been owned for less than two years.
Selling a home early has consequences
In most cases, individuals purchase a home to live in it for a while. Taking the time to complete this real estate transaction, move in, and get settled can be complex. However, if you’re in this situation and need to sell your home and go through the closing process the same year it was purchased due to a health problem or work relocation, you need to consider the financial consequences.
Understanding the commission and equity involved with a home sale
One of the most significant burdens of selling your home before you have lived in it for two years is the commission you will have to pay to a real estate agent. Traditionally, it costs around 6%.
Without living in your home too long, it’s highly likely you don’t have much equity built up as your mortgage payments go primarily to pay off interest during the first few years of owning property. In this scenario, renting your home to build up equity may be a better solution.
Paying a tax on capital gains if you sell within the first two years
Before selling residential property, it’s prudent to know all of the rules and regulations involved with the deal. Selling your home within the first two years after purchasing it will require you to pay a capital gains tax if you’ve made a profit.
You want to save as much money as possible on your real estate transaction. Once you’ve reviewed all the implications of selling within the first two years, you may decide to wait before selling.