Brad Konishi, CPA
Selling Real Estate: Do You Have a Gain or Loss?
Updated: Jun 9, 2019
One of the most effective ways to get a waiver of HARPTA is to prove that you will be realizing a tax loss on the sale of your home. Many home sellers believe that they're going to realize a gain on the sale when it's not necessarily true!
At it's simplest, this is how a tax gain/loss is calculated:
Here is a quick explanation of some of the terms:
Original Basis: The original basis is the tax basis at the time you acquired or received the property. This is dependent on how you acquired the property (Purchase? Gift? Inheritance?)
Improvements: Changes you made to the property that added value, extended the useful life, or changed it for a different use. The improvement must still be a part of the home when sold. The smaller stuff usually fall into the "repairs" category, which are not improvements, even if they technically fit the definition.
Depreciation: If the property was a rental or otherwise used for business, you were entitled to depreciate it for tax purposes.
A home that was not a rental and not used for business purposes (such as a vacation home or second home) should not be depreciated on your tax returns. This number is the sum of the depreciation you've taken on the property since May 6, 1997.
Gross Selling Price: How much are you selling the home for?
Selling Expenses: These can be found on your settlement statement. If you are in escrow, you may ask your escrow company to give you an "estimated settlement statement" or "tentative settlement statement".
If you'd like a rough idea of whether you have a gain or loss, call us at 808-737-4412 or use our contact page. We'll be glad to discuss your situation.