Tax on selling a house

Filamretire said. . . . Confused. Google states Capital Gains Tax is the income tax levied on the profit gained from selling a house. It then states the tax is 6% of the gross selling price or market value. That isnt capital gains! It should be the difference between what you bought it for and what you sold for. Do they not understand what Capital Gains means?
On consulting the BIR I did find that current estate taxes are 6% based on the NET  value, so thats good for inheritance

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There is a $250,000 exemption for a single tax payer and $500,000 if married and filing jointly.
   

   

    Confused. Google states Capital Gains Tax is the income tax levied on the profit gained from selling a house. It then states the tax is 6% of the gross selling price or market value. That isnt capital gains! It should be the difference between what you bought it for and what you sold for. Do they not understand what Capital Gains means? On consulting the BIR I did find that current estate taxes are 6% based on the NET  value, so thats good for inheritance        -@Filamretire

You are correct, what they are doing is not collecting true "capital gains". Further confusing the matter is , as far as I can see, at the 'closing' table the attorney will produce 2 deeds of sale, ( a common procedure that the attorney takes part in and which the BIR is fully aware of). the real one and the one used for the capital gains calculation which may show a payment of 50% or more less. In my case, our land sale was at 50% but the BIR had a different figure in mind based on other sales in the area so I didn't really pay tax on full value but maybe 60% so you can see, this is not capital gains at all. It is more like a settlement with BIR, somewhat arbitrary but nothing to complain about. The USA tax is based on true capital gains, actual profit. In that case I had to file a rather complicated return that included SSA (partly taxed), pension (fully taxed) and the cap gain that depends on what my total income was. From that figure one simply subtracts the 6% tax paid to the Philippines because due to tax treaty, capital gains is not double taxed. In my case the US capital gains tax was much higher than the Philippine 6% tax.

Same in Australia Dan or close and only on the profit but in Oz the primary place of residence incurs no CGT. Straight up sale.

Here what you say we saw first hand with contracts, 2 of them, one for us and one for the owner, ours was 5.75M and his was 3.5M, all signed and witnessed. The owner did try on the oh and you pay the CGT. to which I said no, the seller is liable for all taxes, we already negotiated the price and at contract signing you are moving the goal posts, the goal post is the office door and we will use it if you try that on. He wore his responsibility. That was near 7 years ago and doubt anything has changed.

Still not sure if the OP is buying or selling but a common practice here is the purchaser wears the CGT. but the astute say no or renegotiate the sale price. The seller is liable for all taxes.

OMO.

Cheers, Steve.

   
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There is a $250,000 exemption for a single tax payer and $500,000 if married and filing jointly.       
   

    -@Enzyte Bob

In the USA, the exemptions only apply if the house was your primary residence for at least two of the previous 5 years before date of sale.  If not a primary residence , like a rental property, then the amount of depreciation recaptured as part of the gain is taxed as ordinary income.

    Same in Australia Dan or close and only on the profit but in Oz the primary place of residence incurs no CGT. Straight up sale.Here what you say we saw first hand with contracts, 2 of them, one for us and one for the owner, ours was 5.75M and his was 3.5M, all signed and witnessed. The owner did try on the oh and you pay the CGT. to which I said no, the seller is liable for all taxes, we already negotiated the price and at contract signing you are moving the goal posts, the goal post is the office door and we will use it if you try that on. He wore his responsibility. That was near 7 years ago and doubt anything has changed. Still not sure if the OP is buying or selling but a common practice here is the purchaser wears the CGT. but the astute say no or renegotiate the sale price. The seller is liable for all taxes.OMO.Cheers, Steve.        -@bigpearl

The USA has the same thing, no tax on capital gains for the primary residence. In the case I was referring to, the sale was land only. I agree that technically the seller is responsible for CGT. In our case the buyer paid per our agreement but the BIR paperwork shows they paid in our behalf usingy wife's tax ID number. In doing so, the paperwork shows we paid the tax, making it possible to deduct the Phils 6% from our USA CGT. Actually we did pay by lowering the selling price. I know Australians don't have to worry about CGT earned outside your country, only the USA and Ethiopia tax by citizenship on income earned anywhere in the world.

mugteck said. . . . In the USA, the exemptions only apply if the house was your primary residence for at least two of the previous 5 years before date of sale.  If not a primary residence , like a rental property, then the amount of depreciation recaptured as part of the gain is taxed as ordinary income.

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That sounds reasonable . . . . If you have a rental property, a few have many, it should be taxed as income.

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78.7 million Americans own their home and approximately 1.5 million own a second home.   

Thanks, yes, my wife would be the seller of primary residence in Philippines in a whatif scenario. Dan, I have heard that you can lower taxes by having this extra document and is common, so that helps. My wife is a dual citizen. Something I hadnt considered, do we report a sale to the IRS on a foreign property? If so in this case our primary residence would be exempted $500k for the US taxes and we would pay 6% of the extra documented value for PH taxes?

I get that US tax of the gain would be more, it is a gain after all, but PH would tax even if you lost money on it.

Yes, US citizens must report all of their global income.  As long as it was your primary residence for at least 2 of the previous 5 years, the exclusion is applicable.

    Yes, US citizens must report all of their global income.  As long as it was your primary residence for at least 2 of the previous 5 years, the exclusion is applicable.
   

    -@mugteck

If I were to claim that, I would also confirm that it applies to primary residences physically located outside the US. But you may know this to be true; I do not because we have only sold land here which is not eligible for USA IRS exemption.

@danfinn Good point that, would have to check

@Filamretire Dan, I have heard that you can lower taxes by having this extra document and is common, so that helps.

Not sure what that is and I am not a professional accountant. The referenced document may be the secondary deed of sale that I referenced previously showing sale price of about half of what you paid. You can use that for BIR but for USA IRS, only the true deed of sale can be used.

Sorry for my ignorance guys but doesn't the good old USA have tax treaties with the Philippines? Not double taxing, I have never paid tax here even when I worked for a US based company and simply declared in Australia as income,,,,, no different to if I paid tax on income here in PH. I would declare that in Australia as tax paid on foreign earnings but the earnings like imputation credits still go to income less the imputation (tax paid) but as overall income may change your tax rate in your country, sliding scale.

OMO.

Cheers, Steve.