My husband and I bought a condo 10 years ago and it's appreciated in value by $1 million. How much will I pay in capital gains taxes when we sell? What can I deduct?
You'll have to pony up capital gains taxes of up to 20% to the federal government, depending on your tax bracket, and another 12.7% at the city and state level, but you can likely avoid paying taxes on much of that amount, our experts say.
Let's take a look at possible deductions:
- First off, assuming the condo is your primary residence, you can write off about half, thanks to a $500,000 exclusion for married couples, says Greenberg & Brennan's Albert Kushnirov, a New York accountant who specializes in condos and co-ops. (To qualify as a primary residence, you must have owned the condo for at least five years and lived there for two.) A single person in the same situation could deduct $250,000.
- Second, you can also deduct the cost of any upgrades you made to the place over the years, from kitchen and bathroom renovations to new floors and fixtures. “If it was a gut renovation, they can deduct pretty much everything,” Kushnirov says.
- Likewise, you can deduct what you personally contributed toward any of the building's outlay on capital improvements. The "total amount of the assessments paid by the unit owners can be obtained either from the management company or the condo’s auditors," Kushnirov says.
- Lastly, you don’t have to pay taxes on closing costs associated with selling the condo, including the broker’s commission (which is typically 6% of the sale price, or $120,000 on a $2 million sale) or attorneys’ fees (which generally run from $2,000 to $5,000 in New York).
Of course, as with any complicated financial matter, you'll likely want to consult a professional who can advise you on the specifics.
Leigh Kamping-Carder is a senior editor at BrickUnderground.com, the online survival guide to finding a NYC apartment and living happily ever after. To see more expert answers or to ask a real estate question, click here.