30 Sep I’m selling my condo. How do I calculate capital gains?

Q. I am selling my Florida condo, which I owned from April 2021 to August 2024. I’m a New Jersey resident. How do I calculate capital gains taxes for New Jersey and for the IRS?
— Owner for now

A. It sounds like this was a vacation home rather than your permanent home.

Had this been your primary residence, it may have qualified for a primary residence exclusion on some if not all the gain.

As it was a second property, any gains will be subject to capital gains tax, said Joseph Sarnecki, a certified financial planner with U.S. Financial Services in Fairfield.

Because you owned the property longer than one year, your gains would be considered long-term capital gains and will be taxed at more favorable rates federally, he said.

Federal capital gains tax rates depend on overall income, Sarnecki said, pointing to this chart.

New Jersey does not have a separate capital gains tax rate, and any gains are added to income, he said.

“To calculate the gain on your property, you would have to take the sale price, minus your cost basis on the property,” he said. “For example, if you sold the property for $500,000 and your cost basis was $300,000, you would have a long-term capital gain of $200,000.”

Sarnecki said to calculate your cost basis, you should take the purchase price of the property, plus acquisition related expenses, as well as any property improvements that add value — not basic maintenance and repairs.

In the example above, let’s assume you purchased the property for $250,000, had $5,000 in acquisition cost and spent another $45,000 on a kitchen renovation. Here, your cost basis is $300,000, he said.

“We are assuming this is a second home, and not an investment property where you took depreciation, which could result in additional taxes,” he said. “It is always recommended to consult with an accountant to review your specific tax situation.”

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This story was originally published in September 2024.

NJMoneyHelp.com presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.