Capital gains
Below is a MRR and PLR article in category Finance -> subcategory Real Estate.
Understanding Capital Gains in Maryland Real Estate
Introduction
Capital gains in real estate occur when you sell a property at a higher price than you paid for it. In Maryland, these gains can be categorized as either short-term or long-term, depending on how long the property is held.
Types of Capital Gains
- Short-term Capital Gain: This applies if you sell your property within three years of purchasing it.
- Long-term Capital Gain: If you sell the property after owning it for more than three years, it’s considered a long-term capital gain.
Calculating Capital Gains
To calculate capital gains, subtract the property's acquisition cost from its selling price. The acquisition cost includes the purchase price, registration fees, repair costs, and any other capital expenses. The selling price encompasses all costs related to selling, such as commissions, registration fees, stamp duty, and other transfer expenses.
Capital Gains Tax
When you profit from a real estate sale in Maryland, you're subject to capital gains tax. This tax is calculated by deducting the acquisition cost from the selling price, with the resulting gain added to your taxable income. Tax rates can differ between short-term and long-term gains, so it's important to understand Maryland's tax structure to determine your applicable tax bracket.
Criticism of Capital Gains Tax
Critics argue that capital gains taxes can lead to double taxation. The property’s value may already be counted in asset evaluations for wealth tax purposes. Thus, including capital gain in the same year’s income tax can result in being taxed twice.
For more information, visit [Maryland Real Estate Secrets](http://www.marylandrealestatesecrets.com).
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