Everything You Need to Know About Capital Gains
2 min read
Investing in commercial real estate takes time, consideration and skill on both the investor and agent levels. Those looking to dip their toe into the market are often thinking of one thing—profitability. A profitable asset is a perfect addition to any commercial real estate portfolio, as it creates a safeguard when looking to sell.
Capital gains is a term commonly used in commercial real estate that refers to the increase in value of an asset, in this case, a property, when sold. Calculating your capital gains is simpler than you may think; all you have to do is subtract the original purchase price from the sale price.
Capital Gains = Original Purchase Price – Sale Purchase Price
Capital loss, the opposite of capital gains, is incurred when there is a decrease in the asset value from when it was purchased to when it was sold.
Capital gains fall into two categories— short-term and long-term. Short-term capital gains are recognized on assets sold after holding them for one year or less, whereas long-term capital gains are recognized once you hold the property for more than one year. It is important to note that both types of capital gains must be claimed on your annual tax return. Short-term capital gains are taxed based on the investor’s gross income. Long-term capital gains are typically taxed at a lower rate than regular gross income.
A clear understanding of capital gains will allow you to factor it better into your investment strategy.
Reference
Chen, J. (2022, September 5). Capital gains: Taxes and asset types. Investopedia. Retrieved September 27, 2022, from https://www.investopedia.com/terms/c/capitalgain.asp
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