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Capital gains tax on selling a second property

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Zoya_99
Joined:
14.03.2020
Posts: 595
Topic Starter
27.01.2025 10:28
I'm currently looking to sell a second home that I bought a few years ago as an investment property. It has appreciated quite a bit, but I'm really worried about the tax implications of the sale. I've heard about capital gains tax, but I'm not sure how to calculate my cost basis or if there are any exemptions I might qualify for. Does anyone have experience with this or know if I should be talking to a CPA instead of just trying to figure it out myself? Any advice on what I should be preparing for before I list the place would be greatly appreciated.
19 replies in this topic
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Kevi_M
Joined:
02.03.2021
Posts: 2492
13.02.2025 00:26
Definitely talk to a CPA. Real estate tax laws are way too complex to handle on your own, especially if you've done any renovations.
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Goshko_Bolo
Joined:
22.02.2021
Posts: 1538
15.02.2025 10:17
In reply to a previous post
I second that. A professional will help you figure out your cost basis, which includes more than just the purchase price, like closing costs and improvement expenses.
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Bobi_J
Joined:
08.03.2024
Posts: 366
18.03.2025 04:25
Don't forget about depreciation recapture. That's a nasty surprise for many people selling investment properties.
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chicho_savet
Joined:
31.01.2024
Posts: 2332
26.03.2025 05:11
In reply to a previous post
Wait, does depreciation recapture apply even if I didn't actually claim it on my taxes? I'm in a similar boat.
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Sofiya_G
Joined:
28.09.2024
Posts: 2089
23.04.2025 19:09
In reply to a previous post
Yes, unfortunately, the IRS considers it 'allowed or allowable,' so they tax it regardless.
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Selekcioner
Joined:
22.12.2023
Posts: 492
11.06.2025 02:08
Have you looked into a 1031 exchange? It might allow you to defer the taxes if you roll the profit into another investment property.
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Marius_C
Joined:
31.05.2024
Posts: 738
07.07.2025 19:32
In reply to a previous post
1031 exchanges are great, but the rules are very strict about timelines and using a qualified intermediary. Definitely don't do that without a pro.
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Bobi_J
Joined:
26.01.2020
Posts: 1317
11.07.2025 06:03
I tried calculating it myself once and ended up off by thousands of dollars. Hire an accountant, it pays for itself.
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Maistor_Ivan
Joined:
20.11.2020
Posts: 566
14.07.2025 07:59
Keep all your receipts! Every single one for repairs or upgrades. You'll need them to prove your basis if you get audited.
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simon_v
Joined:
24.05.2021
Posts: 1464
25.07.2025 08:10
In reply to a previous post
Totally agree with the receipts advice. I keep mine in a digital folder now.
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ekspert_forum
Joined:
13.09.2025
Posts: 866
21.12.2025 11:23
Is there any way to avoid the tax entirely? I read somewhere that if you lived there for a while, it might qualify for an exemption.
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NeZnamNoPisha
Joined:
29.12.2024
Posts: 719
24.12.2025 10:12
In reply to a previous post
That's the Section 121 exclusion, but it usually requires you to have lived in it as your primary residence for two of the last five years.
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Goshko_Bolo
Joined:
16.01.2023
Posts: 1731
18.01.2026 00:30
In reply to a previous post
Yeah, if it was purely an investment property and you never lived there, you're likely going to owe capital gains.
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NqkoiNesh
Joined:
07.07.2022
Posts: 2320
19.01.2026 03:38
It's not the end of the world, just factor the tax into your listing price so you know exactly what your net profit will be.
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tech_geek_bg
Joined:
25.10.2020
Posts: 1520
23.01.2026 11:07
In reply to a previous post
Good point. Run the numbers with an estimated tax hit before you set your asking price.
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Alan_K
Joined:
16.07.2022
Posts: 2457
10.02.2026 18:41
Just be prepared for the federal tax and potentially state tax as well. Don't forget your state!
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Krasen_K
Joined:
13.10.2023
Posts: 2213
13.03.2026 21:02
Does anyone know if long-term capital gains rates are lower than short-term ones? I've held mine for four years.
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star_vulk
Joined:
09.07.2024
Posts: 103
15.03.2026 20:33
In reply to a previous post
Yes, holding it for more than a year qualifies you for long-term capital gains rates, which are significantly lower than ordinary income tax rates.
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kamilo
Joined:
08.02.2024
Posts: 628
27.03.2026 14:39
In reply to a previous post
Thanks for the info everyone. I'm going to set up a meeting with a tax advisor this week before I do anything else.

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