Before selling a home in Utah, there are several things to consider. Beyond showings, repairs, and marketing, selling a home has extra costs and taxes that you need to be aware of. It is essential to understand each of these before committing to selling your house in Utah. Let’s take a closer look at capital gains and the other costs of selling your home.
Capital Gains Tax on Selling a Home
The first thing to know is that you will have to pay both federal and state capital gains tax when you sell a home. A capital gain occurs when you sell an asset for a higher price than you bought it.
Capital gains tax is the tax you pay on the profit from the sale. In most instances, the profit is measured by the difference between the sale price and the original price you paid. The number is adjusted depending on a few different factors like depreciation.
Capital gains taxes normally only apply to long-term gains. If you have owned the home for less than a year, the profit you earn is taxed as income. To qualify as long-term gains, you must have owned it for a year and one day before it is sold.
There are both federal and state capital gains taxes. The federal rates depend on how much you make in a year. If you make less than $78,750, your tax rate is 0%.
For married individuals earning between $78,751 and $434,549, the rate is 15%, with some stipulations depending on tax and marital status.
For those with a taxable income over that amount, the rate is 20%. Utah’s capital gains tax is much more simple to calculate. As of 2020, the capital gains tax is the same as the state’s income tax of 4.95%.
The capital gains tax is not owed on the sale of a primary residence up to $250,000 if you can meet certain conditions.
- You lived in the house for the last two years
- A primary residence must be lived in for a minimum of two years out of the last five of ownership. The years don’t have to be consecutive.
- You must have owned the home for the last two years
- To claim the exemption, you need to own the building for the last two years. If you haven’t, you will pay more expensive short-term tax rates.
- No other exemption has been claimed recently
- You can’t have claimed a different exemption within the last two years in order to claim the residency exemption.
This only applies to your primary place of residence, not to investment properties or vacation homes.
Costs of Selling a Home
The next thing to understand about selling a home is how much it costs you. It may seem strange that selling such a large asset is expensive for you but fees and other costs pile up quickly. Repairs, realtor commissions, closing costs, and other fees can eat up to 9.5% of the final sale price.
Costs are highly variable, depending on your location and the home you are selling. If you base your estimated costs on the average $577,112 Utah home, the expenses would average:
- Sale Prep- $1,700 to $13,300
- Realtor Fees- $26,500 to $35,300
- Buyer Incentives- $6,100 to $17,900
- Closing costs- $3,300 to $5,500
- Relocation expenses- $7,500 to $11,200
In the end, the total cost could range from $43,500 to $69,900. If you choose to take the “for sale by owner” route, you need to keep in mind advertising costs as well.
Avoid the Hassles of Utah Real Estate
Instead of worrying about selling on your own or finding a decent realtor, consider selling your home directly. Fast Home Offer Utah is a company that buys houses as is. They pay cash and help you avoid the months of listing, showings, and waiting that comes with the traditional selling method.
Save time and effort by eliminating all the expenses and duties that come with selling your home. Submit a form on our website and get a fair cash offer within 24 hours. Pick your closing date and sell on your terms within seven days. No contracts, commissions, or cleaning are required, and we even cover the closing costs. Contact us today to learn more.