I have investment real estate and I am thinking of selling it.  How do I go about figuring what my capital gain might be?

The difference between what you sell the property for and your basis in the property is the amount on which your tax will be calculated.  The basis of your property is generally what it cost you.  Your adjusted basis (which is the basis you use to determine gain or loss) is the result of increasing your purchase price by certain costs you incur.  Increases to your basis include, but are not limited to (1) the cost of improvements having a useful life for more than a year, (2) assessments for local improvements (e.g. sidewalk or sewer special assessment), legal fees incurred in the cost of defending or perfecting your title, and zoning costs. It is important to keep records year-by-year of your costs as you incur them so that they will be available when you need to make the calculation. The depreciation that you take annually will decrease your cost basis.  You are also entitled to deduct from the sales price, for tax purposes, your selling expenses, which include commissions, advertising fees, legal fees, any loan charges paid by you on behalf of the buyer to the buyer's lender, such as loan placement fees or points or improvements you make to the property in order to make it more salable.


If you have questions about this or any other real estate matter, please contact Tom Bennett at (617) 531-6574 or tvb@barronstad.com.