What taxes am I responsible for if I sold a lot and want to put money down on my home's principal?

by William R. Lazor, CPA | Nov 21, 2017
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I sold a lot for $87,800. I used $25,000 to pay off debt, and want to put $60,000 down on my home’s principal. What taxes would I have to pay on this?

You have to compare the sale price to the amount you originally paid for the lot plus any improvements you made while you owned it. The excess sale price or cost would give you a gain or loss. If you held the lot for more than a year and had a gain, it would be long-term capital gain. The capital gain tax rates depend upon your other income, and could range from 0 percent to 20 percent for federal tax purposes. If you are a Pennsylvania resident or the land was located in Pennsylvania, there would be a state income tax on the gain at the rate of 3.07 percent.

The fact that you used the proceeds to pay off debt has no impact on your gain or loss from the sale.

For more resources, check out PICPA’s Money & Life Tips, Ask a CPA, or CPA Locator.

Answered by: William R. Lazor, CPA, is a partner/shareholder with Kronick Kalada Berdy & Company PC in Kingston, Pa.

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The responses are based on the limited information provided by the questioner and apply the laws and regulations at the time of posting. Other options could arise as rules and regulations may change over time, including but not limited to the passage of the Tax Cuts and Jobs Act of 2017. They are intended to provide general information, not specific accounting or tax advice; they are not intended or written to be used and cannot be used for the purpose of avoiding or evading taxes or penalties under the IRS code or regulations. Views expressed do not imply an opinion of the PICPA, its officers, directors, employees, or members.
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