Is There Tax on Selling Land? A Closer Look

Is there a tax when you sell land? The answer is yes, and it’s important to understand how it works, so you can plan accordingly. This article breaks down the basics of the land sale tax, which will help you to better understand what to expect.

 Taxes may seem like a headache, but they’re an important part of our society and economy. Let’s dive in to learn more about the tax on selling land!

What Happens When You Sell Land?

People who sell land are subject to capital gains tax. This is the case even if the person buying the land would otherwise be exempt from tax.

There are two ways you can pay capital gains tax on selling your land.

Option 1: Sell for profit (gain)

If you sell Land at a profit (gain), this counts as income. You need to complete a tax return.

Option 2: Sell for loss (not gain)

If you sell land at a loss, this is not counted as income when completing your tax return. This option only applies when the land was purchased on or after 20 September 1985.

You can work out how much capital gains tax you have to pay on the following basis:

Understanding Capital Gains Tax

Your total profit or loss from all your CGT events for a year

– Your total deductible costs –

= Your net capital gain or loss for that income year.

You can only offset losses against profits in the same year. Losses cannot be carried forward to a future year.

The Benefits of Selling Land

It’s very rare that people choose to sell their land, but there are many benefits of doing so. When you decide to sell your original plot of land, you’re likely to be able to get quite a large sum.

The first major benefit is money!  Selling your land will give you a lot of money. Most likely enough for you to buy another plot of land in the exact same spot.

Another large benefit is that when you sell your land, you become capable of buying a new plot in a different location. Maybe the original was too expensive, and it contained other houses. If so, move on!

You’ll also gain more free time. There’s no reason for you to spend hours and hours every day tending to the needs of your land. Once you sell, all that pressure is gone.

If you’re serious about selling your land, take a look at the highlighted link to learn about selling land documents.

Understanding the Tax on Selling Land

There is a tax on selling land. So, what does this mean for you? Well, if you’re buying land and selling it within a year of purchase, the IRS wants to know about your profit. 

If you sell more than $250,000 in property or make over $150K on capital gains from sales, they might require some documentation.

 We hope that reading this post has been helpful. Feel free to check out other posts on our website. Thank you so much for taking the time to read our content!