![]() If you owned the property for more than one year before you sold it, the gains are considered long-term capital gains if you owned it for less than a year, the gains are short term. The amount you originally paid for the asset is called the tax basis, and it's used to determine the gain from the sale you deduct the basis from the sale price, and the difference is your gain. These types of gains are realized on things like the sale of stock, the sale of a vehicle or the sale of a home. Capital Gains TaxĬapital gains are the income you receive when you sell an asset for more than you paid for it. If you use a quit claim deed, however, the transaction may be exempt from transfer tax if there was no money paid for the transfer. For example, Pennsylvania assesses a transfer tax, but so does Philadelphia. Municipalities in some states can also assess transfer tax. In a home purchase transaction, the transfer tax is calculated and paid at closing, and it is a percentage of the purchase price, or it is a percentage of every $500 or some other calculation. Some states assess a transfer tax on the sale and transfer of real estate. Quit Claim Deed and Tax Exemptions: Transfer Tax Quit-claimed property may or may not have clear title, and usually, no money changes hands in such a transfer. In contrast, if you were to buy the property in an ordinary home sale, you would need to run a title search and get title insurance, then go through a closing where all the liens are paid in full before the transfer is complete, thus giving you clear title. This means that if you receive property via a quit claim deed, you're taking it as it is, subject to all the mortgages and tax liens and any other encumbrances. What Is a Quit Claim Deed?Ī quit claim deed is a type of deed that transfers ownership of real property from one person to another without any types of warranties. ![]() If the person to whom you transfer the house later sells the property, she might end up owing a hefty capital gains tax. If you quit claim your principal residence to someone else, the value of the home at the time of the gift will go towards your lifetime gift limit for estate tax purposes. ![]()
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