Canada to Arizona Real Estate
Am I subject to any Capital Gains taxes when I sell?
First off, you should always consult with an accountant or tax professional to determine your tax liability and the best possible course for you to take.
If you hold the property for less than 12 months you will be subject to tax at the ordinary income tax rates.
If you hold the property for more than 12 months you will be subject to capital gains tax by the IRS. Long-term capital gains are taxed at long-term capital gains rates, which is usually less than ordinary tax rates. The long-term capital gains tax rate is either zero percent, 15%, or 20%, depending on your marginal tax bracket. Capital gains are the net profit after the costs of the sale are deducted (escrow fees etc), minus the basis (initial cost plus improvement costs) minus any depreciation taken. Capital gains taxes may be withheld from the proceeds of the sale under the guidelines of FIRPTA (Foreign Investment in Real Property Tax Act) {see the next question - what are withholding taxes... for more information on FIRPTA}.
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