According to the experts, a property purchase necessitates new IRS processes.
You have until June 30th to submit your yearly Internal Revenue Service statement (IRS). This is one of the most concerning times, especially when additional objects appear to have been added, like in the case of a property sale or purchase.
However, taking some details into account before beginning the process of delivering the declaration might make the procedure easier. A residential market digital platform expert, explains what to do if you sold or bought a property in 2021:
1. Consider Capital Gains: Capital Gains relate to the profit or loss made and should always be taken into consideration when making a purchase or sale. They are computed by the Tax Authority using a formula that takes into account a number of variables, including the price at which the house was purchased, the price at which it was sold, and the monetary appreciation at both times. Generally, half of the value of Capital Gains is subject to IRS taxation, with the amount of tax due later depending on the seller's income and expenses, as well as the amount of Capital Gains reinvested or not.
2. Complete Annex G: whether or not the sale or purchase of a property created Capital Gains, these transactions must be recorded in the IRS declaration in the year after the sale or purchase. Simply attach Annex G to the declaration and fill in table 4 with details about the property, such as the date of purchase and/or sale and the prices which they were sold.
3. Consider the time frame for reinvesting the property profit in permanent residence: you can purchase a new property for permanente residence up to 24 months before the sale or up to 36 months after the sale to reinvest the Capital Gains and avoid paying taxes on them. If you have recently purchased or intend to purchase a new property, you must declare it in Annex G. (Table 5).
4. Include expenses associated with the property: expenses associated with the property sold/acquired and that may influence the reduction of the potential value of Capital Gains, such as asset recovery works performed in the previous 12 years, application for an energy certificate, taxes paid at the time of acquisition, or expenses with real estate mediation, are also included in Table 4 of Annex G. It is worth noting that the taxpayer must be able to demonstrate the same expenses.
5. Taxation varies by age: people over 65 may qualify for a Capital Gains tax reduction or exemption if they sell their home and do not buy another one. To do so, they must spend up to six months after the property is sold in an insurance contract (such as a Savings and Retirement Plan), a pension fund, or contributions to the public capitalization program ("State PPR").