Selling a property in Riverdale, Bronx, requires a comprehensive understanding of the associated tax implications, particularly concerning capital gains taxes. Being well-informed can help you plan effectively and maximize your net proceeds.

Capital Gains Tax Overview

Capital gains tax is levied on the profit realized from the sale of a property. In New York State, capital gains are taxed as ordinary income, with rates ranging from 4% to 8.82%, depending on your income bracket.  Additionally, New York City imposes its own income tax, which can range from 3.078% to 3.876%. 

Primary Residence Exclusion

If the property you’re selling has been your primary residence for at least two of the past five years, you may qualify for a capital gains exclusion. This allows single filers to exclude up to $250,000 of capital gains from taxation, while married couples filing jointly can exclude up to $500,000. 

Strategies to Mitigate Capital Gains Tax

1. 1031 Exchange: For investment properties, a 1031 exchange allows you to defer capital gains taxes by reinvesting the proceeds into a similar “like-kind” property. This strategy requires strict adherence to IRS guidelines and is not applicable to primary residences. 

2. Timing of Sale: Consider the timing of your sale to align with a year when your taxable income is lower, which may result in a reduced capital gains tax rate.

3. Home Improvements: Investing in capital improvements can increase your property’s basis, thereby reducing the taxable gain upon sale. Keep detailed records of all qualifying improvements.

Conclusion

Understanding the capital gains tax implications is crucial for Riverdale homeowners planning to sell. By leveraging available exclusions and strategic planning, you can minimize your tax burden and maximize your proceeds. For personalized advice and a comprehensive property evaluation, consider reaching out to Rafael Barbosa, a seasoned real estate expert specializing in the Riverdale market.