Betsy Heller: Hi folks, Betsy Heller here. Today we're going to talk about the paperwork when you're preparing to sell your home and trying to figure out how much you actually have as a taxable basis, capital gains estimated, so that you can assume what you're going to need when you are 10-31ing your money, which means you're taking an investment property and buying another one, or if you're moving your home, you're taking the equity from your home to another home. Betsy Heller: So we'll start with the first calculation. The first piece of paper that you're usually going to work backwards from, and this is a 593-E, you can usually give this to your tax guy and they can help you with it. But a lot of times people haven't been providing their tax guys the information that goes into this. So I'm not a tax preparer, I'm a real estate broker.
Betsy Heller: So I'm just going to give you the basic overview of the paperwork to gather so that you know what to ask your accountants or CPA or enrolled agent to help you with. So you're going to have hopefully gathered all of your expense, not your expense paperwork, but your capital gains paperwork over the time that you've owned the property. So if you own the property for a long time, like my husband and I have, maybe you've done a number of actual remodels that have upgraded the home, so you've added on square footage to the home, you've replaced a bathtub with a jetted whirlpool tub, you have taken the 30 inch standard range and replaced it with the deluxe 48 inch hybrid range. You've added a pot filler above the stove. Those are upgrades and those things you're going to be able to show receipts for and they are not going to be part of your taxed capital gains, at least according to my tax guy.
Betsy Heller: So you'll be able to take those receipts and have that calculation. Same goes if it's an investment property, those things would then be capital gains that you're going to add onto your basis as opposed to expenses on a property that you have that maybe you had to replace the stove with the new stove. So you took out a 30 inch and you put in a 38 inch, that's not an upgrade, that's just a replacement or repair. So you're going to go through those items and figure out what's a repair and what's an actual improvement so that you can have that paperwork put together and correctly put the right numbers on here, and I'm just going to use some easy numbers, but perhaps you bought the home for $500,000 a long time ago and you had some major upgrades you did, you added on maybe a bedroom to the property and you upgraded and added a gas line so you can do gas cooking and had a gas heater and all told your improvements cost you $100,000, that you have receipts for.
Betsy Heller: So now instead of having 500,000 into your basis for the property, you now have 600,000. So when you go to sell your property, what's actually gains, so if you sell your property for 800,000, it's going to be 800,000 less your cost of sale, minus the 600,000 instead of 500. So for rough numbers, it would be, say, 750 minus 600, would be 150, as opposed to 250. So you kind of have an idea of what is actually considered taxable gains. Because maybe you want to do something different with the money. Maybe you're not necessarily going to reinvest it in another home or maybe you think that you might actually have more than a three year window in there for the re-investment. So that's one of those things that you want to definitely keep track of.
Betsy Heller: Then the second piece of paperwork that most people need some time to go find, and that is if you had a second trustee, perhaps for solar, maybe for a remodel that you did have some kind, you had maybe a $20,000 solar second, or maybe you had a HELOC that you put on the property to pay for the kids' college and you have then paid it off, but you didn't necessarily get a reconveyance.
Betsy Heller: So you want to make sure that you find that piece of paper, that reconveyance, or you ask me to talk to title and help you get that piece of paper before we go into escrow because it really can hold up the close of escrow and slow things down when you want to be focused on moving.
Betsy Heller: So hope that this couple of tidbits helps you in getting the paperwork together. Give me a call as always for more questions. I can give you some referrals for some great tax people. Talk to you soon.
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