Real estate appraisals

How is capital gains calculated when selling a house. 

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When selling a house, capital gains are calculated by determining the difference between the sale price of the home and its adjusted cost basis. Here’s a breakdown of how to calculate capital gains on the sale of a home:

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1. Determine the Selling Price

The selling price is the amount the house is sold for, minus any selling costs such as real estate agent commissions, legal fees, or closing costs.

• Selling Price = Final sale price of the home - selling expenses

 

2. Calculate the Adjusted Cost Basis

The cost basis is what you originally paid for the house, plus the cost of major improvements and associated costs, minus any depreciation or certain credits received during ownership.

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• Cost Basis: This is the original purchase price of the home.

• Adjustments to Basis: Add any major home improvements that increased the value of the home (e.g., room additions, remodeling, new roof, etc.) and subtract any depreciation (if applicable).

• Adjusted Cost Basis = Purchase price + capital improvements - depreciation (if applicable)

 

3. Calculate Capital Gains

The capital gain is the difference between the selling price and the adjusted cost basis of the home.

• Capital Gain = Selling price - Adjusted cost basis

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Consulting a tax professional is often advisable to ensure accurate calculations, especially for large or complex transactions.

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Walson Consulting Inc. is experienced in providing Capital Gains Appraisal reports and we will work with you to provide a detailed and informative report with in depth valuation analysis and final value conclusion. 

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You can either request a current market value appraisal report at the time of converting your principal residence to an income property OR you can request a retrospective appraisal report estimating what the value of the property was at the time of conversion. 

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