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Capital Gains Tax: 3 Dreaded Words When Selling Your Home

September 14, 2018

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CAPITAL GAINS TAX red stamp text on white

Capital gains tax applies when you sell something for a profit. That means if you’re selling your home for more than you paid for it, you need to report that gain to the Internal Revenue Service. That’s when the IRS taxes those gains, and the amount could be hefty depending on how much profit you make. That is unless you meet these three conditions that exclude some or all of the capital gains taxes:

  • You’ve been the homeowner for at least two years.
  • You’ve lived in the home for the last two years.
  • You haven't excluded the gain from another home sale for at least two years.

Single homeowners who meet these conditions can exclude up to $250,000 of their gain, while those who are married and file jointly can exclude up to $500,000, as long as your partner lived in the home for at least two years. You just have to be cohabitating, not married, unless you or your partner sold a home and used the capital gains tax exemption within the last two years.

Special Circumstances

There’s been a recent change to the rule that also allows exemptions for special circumstances. What is considered a special circumstance? Here’s an example: Perhaps your spouse recently passed away. In that case, the IRS allows you to qualify for the $500,000 tax exemption as long as you sell your home within a two year period. The rule used to say widows or widowers had to sell within the same year their spouse passed away in order to qualify for the full exemption.

Businesswoman happy about the latest capital gains tax news.  Isolated on white.

How are capital gains calculated?

  • Besides real estate, capital gains taxes can apply to any investment, such as stocks or bonds, cars, boats, and other tangible items.
  • Any profit you make on the sale of these items is your capital gain. Money lost is considered a capital loss.
  • Capital losses can be used to offset gains.
  • Your net capital is the difference between your capital gains and your capital losses. For those whose losses exceed their gains, the difference can be deducted on your tax return.
  • To determine what tax rate applies to your capital gain, just include the amount to your income tax. Use this Capital Gains Calculator from the IRS.
  • Please consult your tax advisor to find out how much you can save.

There’s a difference between short- and long-term capital gains

When it comes to being taxed, the length of time you’ve owned a home comes into consideration. This could mean losing or keeping thousands of dollars, depending on your tax bracket and the value of your home.

  • Short-term Capital Gains: Applies to assets you’ve owned fewer than twelve months. In that case, the rate will be equal to your current tax bracket.
  • Long-term Capital Gains: Applies to assets owned for twelve months or more. In this case, you could end up paying nothing, not a dime, depending on your tax bracket. Those with a higher income could have to pay, but only 15 or 20 percent.

 “Long-term gains are always taxed at lower rates than short-term gains, so holding the assets for more than a year will always be the most advantageous tax maneuver,” explains Steven Wolpow, managing partner of Nussbaum Yates Berg Klein & Wolpow, a leading CPA Firm in New York. “There are other financial and investing strategies to consider, so in some instances it still may make sense to sell the assets sooner and take the tax hit. But with all other things being equal, holding the assets more than a year reduces your tax burden significantly.”

Experts recommend homeowners keep concrete records of any updates, too. Remodeling, adding newer appliances, updating floors and windows and other remodeling projects only improve your home’s value.

As you can see, you don’t need to use capital gains tax as an excuse not to move. Instead, make sure you qualify for the capital gains tax breaks listed above. They’re designed to help homeowners like you when it comes time to move.

If you’re considering moving, that probably means selling your home. If your home or home away from home is in Montecito, Hope Ranch or any of the Santa Barbara area’s upscale neighborhoods or communities, call me at +1-805-886-9378 or email me at I’ll happily add your listing to my portfolio of fine homes and find your new dream home simultaneously.


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“It was an emotional experience selling our mother’s home in Montecito that we all loved so much but Cristal made the process easier on our whole family by guiding us through the transaction every step of the way. She knows the market so well and everything she recommended was on point including the asking price, painting, and staging the home, which looked beautiful and helped the buyer envision her new home. We sold it the first day it hit the market with an offer above asking! Cristal did an incredible job communicating with us and the buyer to ensure that the transaction would run smoothly. We highly recommend using Cristal, she was a pleasure to work with! ”

- J & A

“Cristal is a pleasure to work with! Her knowledge of the local real estate market coupled with her amazing listening skills resulted in her showing us an array of homes that were all excellent choices. Her low-pressure patient attitude made us feel extremely comfortable with the whole process. I cannot recommend her highly enough.”

- M.F.

“Cristal Clarke is #1 in her field - and you don't become #1 by luck. Cristal works harder, and longer, and with more charm and patience than any real estate agent I have ever worked with in the past; her calendar has no weekend, her days have no clocks, her only concern is selling your property as soon as possible and for the best price on the market. Am I a fan? You bet!”

- P.B.

“We have used Cristal now several times and cannot express how grateful we are for her expertise, dedication, and unwavering support throughout the entire home-buying process. Cristal is knowledgeable, patient and attentive. Her attention to detail is remarkable, and she consistently went above and beyond to provide us with all the information and resources we needed to make informed decisions. Cristal is a skillful negotiator and advocate. She can navigate complex negotiations with professionalism and grace and felt like a true partner to us in the home-buying process. Cristal has a genuine passion for real estate and a deep commitment to her clients' satisfaction. I cannot speak highly enough of Cristal and her exceptional service. She is a true expert in her field and her dedication to excellence, combined with unwavering support is the reason we choose to work with her for all our real estate buying needs.”

- T.C.

“Cristal is a top-notch realtor who sold my home before it ever went on the market. I had two competing offers that enabled me to get top dollar for my home. Not only is Cristal superb but her team is extraordinary. I cannot say enough about Cristal and her team. They are simply phenomenal, the consummate professionals, who took care of every possible detail, making the sale and transition period, smooth from our end. They are also lovely, caring people, who knew all the right professionals, to get the job done. Thank you, everyone!”

- D.R.

“I could list lots of cool adjectives to describe Cristal. All good by the way. But, that is not why I or anyone should hire Cristal. My reason for hiring her, which proved to be correct, is very simple. She got the job done. And, she does it time and time again and with zero issues. And, that is why she is one of the top agents in the country. End of subject. ”

- M.A.

“Working with Cristal was a complete pleasure. Cristal was extremely patient with us as we evaluated nearly 2 dozen homes over a span of 2 years. Her knowledge of the market is unmatched. Cristal provided us with exceptional counsel as we evaluated opportunities and negotiated pricing. The closing process was handled thoroughly and efficiently. We could not be happier with our purchase and even more happy to now call Cristal our friend.”

- D.K.

“Cristal Clarke has conducted numerous real estate transactions for me beginning 13 years ago with the purchase of a Lemon Ranch. She has handled both large and small purchases and sales with equal dedication. As a negotiator, you can’t find anyone better. Her transactions are always conducted in the most appropriate and professional manner. Cristal has considerable knowledge of the Santa Barbara market.”

- S.N. Decker Ph.D.

“Living in Europe, we were to say the least, unaccustomed to the nuances of Real Estate acquisition in California and Cristal steered us through the process with absolute professionalism and personal attention to detail at every turn. Her in-depth knowledge of the market place combined with enthusiasm and drive was the only reason we secured the property of our dreams and will be forever grateful. If you are looking for personal discrete and private representation of the highest quality we suggest you look no further than Cristal Clarke.”

- Johan and Paula van den Berg

“Cristal is very straightforward, cheerful, helpful, professional and trustworthy….we felt very lucky to work with her.”

- John and Lacey Williams

“After considering our many choices, we are grateful it was Cristal Clarke of Sotheby’s International who represented the sale of our Montecito cottage. We are familiar with Cristal’s reputation of hard work and dedication to clients, but it was her attention to detail that made our experience so positive. She offered suggestions for staging the property, worked in harmony with potential buyers and was even able to secure back up offers. The sale of our cottage was completed much sooner than we expected, due in great part to Cristal’s professional skills and support. We highly recommend Cristal as a first choice for anyone needing representation with real estate.”

- Michael & Nancy Lee

“Our experience in working with Cristal Clarke resulted in the successful and discrete acquisition of a property which was not yet on the open market. Her knowledge of the Montecito/Santa Barbara area and vast expertise blended with her passion for real estate and architecture, provided us with the very highest level of professionalism and personalized services. Cristal exhibited a rare combination of excellent communications, attention to detail, creativity and patience.”

- Richard and Catherine Frinier

“Cristal really breaks the mold. She knows every nook and cranny of this real estate market, understands value, and follows up on everything, all the time. She was incredibly patient with our two year quest to find the perfect house. Every house hunting trip from across the country was well planned, and our time was never wasted. On top of her professionalism and expertise, she is delightful to spend time with. We are thrilled with the home we purchased, and grateful to Cristal for so wisely advising us through this process, right through to the close and beyond.”

- Laurie Siegel

“We met Cristal first in the course of renting a winter home (for three years), then buying a house using her as our agent. She was amazingly good at listening to our wants and showing us homes that fit our needs. Her mastery of the paperwork was perfect. Most importantly, there was never a situation where we doubted her straightforwardness or integrity. If we do another real estate transaction in Montecito (which I doubt, we’re happy with what we purchased), without question we’d use Cristal again.”

- Ken Saffir

“Susan and I just want to thank you for your efforts in the sale of our home. You are really quite amazing. Your competence, persistence, optimism and humor made the entire process effortless. Every problem that arose, you somehow fixed; any obstacle, you overcame. We have bought and sold many homes. It has never been such a painless and enjoyable process!”

- Michael & Susan Marquart

“A little something about “our” realtor, Cristal Clarke. My wife and I came to Santa Barbara about fifteen years ago looking for a seasonal home from which to enjoy the weather and amenities of the central coast. Being in the real estate business myself I was familiar with agents and brokers so entered the market with open eyes. We “flipped” a few houses in the early years, dealing with various agents and finally ended up in Montecito. That’s when good fortune put us together with Cristal. To say we were impressed is to put it mildly. Cristal really knows the market. She is familiar with the area, its history and trends. When we have questions about a particular property she either has the answers immediately or gets back to us by phone or email. There is no waiting or wondering with Cristal. She is an agent who is “on top of it.” Her recommendations as to price points, contractors, inspectors and title agents have proven to be exceptional, showing great insight and the highest professional standards. We consider ourselves exceedingly fortunate to say that Cristal Clarke is our realtor and would recommend her services to any serious buyer or seller.”

- Rob & Judi Kelch