When you buy a real estate in Maryland and sell it for a higher price, the difference between the selling price and the purchase price is known as capital gain. In other words, profit from selling a property for a higher price is the capital gain on the property. Capital gains may be short-term or long-term. Short-term gain: If you sell your property within 3 years after purchasing it, the gain is called short-term capital gain. Long-term gain: When a gain occurs from selling a property after 3 years of its purchase, it is a long-term capital gain. Calculation of capital gain: Capital gain is the difference between the selling price or the transfer price and the total cost of acquisition of the property.
The cost of acquisition includes purchase price of the property, cost incurred in registration of the real estate property in Maryland, its repairs, storage expenses, etc. In short, all the expenses of capital nature are part of the cost of acquisition. The transfer price includes commission or brokerage paid by the seller, registration fees, cost of stamp papers, traveling and litigation expenses incurred while transferring the real estate property in Maryland. Capital gains tax: Capital gains tax is charged on the gain that you make on selling a real estate for profit in Maryland. It is calculated by subtracting the cost of acquisition of real estate from the transfer price of the property.
The difference is added to your taxable income and charged according to the tax bracket you fall into. The tax rates for short-term and long-term capital gains are often different. You must be alert of the tax structure of Maryland to know what tax bracket you fall under and what tax rates are applicable for your capital gains. Criticism: It is often argued that capital gains tax results in double payment of taxes. The property’s value that is sold might have been included in the value of assets sold by you while calculating wealth tax. Thus, including capital gain in the income tax statement in the same year may result in double-payment of taxes. For more read at http://www.marylandrealestatesecrets.com.