Real estate has always had great allure, with a lot of people wanting to buy their own house, and others wanting to take full advantage of a looming rise in real estate prices. Both these instances have certain laws that go along with them, which are called real estate tax laws. It is therefore essential that you know a little bit, if not everything, about tax laws with relation to real estate taxes. The best person to give you information on this and make things clear to you would be your tax consultant.
Capital gains tax, or CGT, is the tax that you pay on any capital gain that you include on your annual income tax return. It is not a completely separate tax, but is simply a part of your income tax. When it comes to real estate, capital gains tax is not charged when selling your 'primary' residence. In order to be able to call a home your 'primary' residence, you need to have lived in that house for at least two years before selling it. If you are single, and the profit you make from the sale is not more than $250,000, you do not have to pay a capital gains tax. If you are married, this value is raised to $500,000. The only time you pay capital gains tax after selling your home is if the profit you make goes over these two limits accordingly, on the balance amount.
For instance, if you are a bachelor and you sold your primary residence for $260,000, then you have to pay a capital gains tax of $10,000, which is the difference between the profit you made and the limit that is fixed by the law. If you are married and sold your primary residence for the same amount, you do not have to pay capital gains tax because the amount you made is less than $500,000.
People who want to make use of the real estate market make use of the definition given to 'primary' residence to make money and not having to pay the capital gains tax. What they do is buy a house and live in it for at least two years, so that it becomes their primary residence. They then move into another house and let out the old house for another two years or so. They make sure to sell the old house within five years of having moved out it, because this incurs no capital gains tax when selling it.