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  • Margaret Schopp

Sold Your House - Now Calculate the Gain


Let's cut to the chase - the gain on your house does not equal the cash you received at closing. 


So, if it is not the cash received; what is it?  The formula is not too bad, so let's walk through a few examples.


Example 1:

Sales price  --  $200,000

LESS:

Purchase price -- $100,000

Sales commission -- $10,000

Gain on Sale -- $90,000


Example 2:    

Same scenario as Example 1, except that over the years, there have been improvements made on the home of $25,000

Sales price -- $200,000

PLUS:

Improvements -- $25,000

LESS:

Purchase price -- $100,000

Sales commission -- $10,000

Gain on Sale -- $115,000


Example 3: 

Same scenario as Example 2, except that over the years, there have been improvements made on the home of $50,000. The $50,000 in improvements includes a $5,000 roof that was installed in 2005.  In 2015, that roof was removed and a new roof was installed (the price is also included in the $50,000.

Sales price -- $200,000

PLUS:

Improvements -- $45,000

LESS:

Purchase price -- $100,000

Sales commission -- $10,000

Gain on Sale -- $135,000


A note regarding the improvements, since the first roof was taken off and replaced by a new roof, the costs of that roof is subtracted from the total price of the improvements. In other words, the improvement needs to be part of the home when it is sold in order for it to be counted as an improvement.  If you remove/replace the improvement, you cannot count that expense in the calculation of the gain.


Another example of that concept - appliances.   Let's say you did a whole kitchen remodel back in 2000.  Part of that remodel was to replace all the kitchen appliances for a total cost of $5,000.  Ten years later, you decide to replace the appliances for $12,000.   You can include the $12,000 in the calculation of the gain, but since you replaced the original $5,000 of appliances, that expense CANNOT be included in the calculation since those appliances have been removed and are not included in the house when it was sold.

So, that is how you calculate a gain on the sale of a primary residence.

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Suite 150,

Walnut Creek, CA 94598

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