Guide to Tax Implications for Out-of-State Sellers

Guide to Tax Implications for Out-of-State Sellers

  • Maureen Lathrop
  • 08/13/21

Do you have properties in Breckenridge or Summit County that you plan on selling in 2021? If so, you’re in luck. The Breckenridge real estate market is currently very competitive, with more prospective buyers than properties listed. The median price of a home is now $1.07 million, up more than 48% from one year ago. 

Many of those who own properties in the Breckenridge area do so for investment purposes, or so they can use the houses as vacation homes and don’t actually live in the state of Colorado. If this applies to you and you’ve never sold Breckenridge real estate before, you’re likely wondering how a property sale will affect your taxes. 

Here’s a quick guide that will help you understand all the tax implications of selling a home when you live out of state.

Understanding Capital Gains

When it comes to selling a home and taxes, it’s all about capital gains. Capital gains tax is the tax on the growth of the value of your real estate investment. When you sell a home, your gains are “realized,” and the government then charges you a tax on your profits. Depending on your filing status (single, married filing jointly, or married filing separately) and your income bracket, your capital gains tax rate could be 0%, 15%, or 20% if you sell in 2021. These rates apply if you own your property for more than a year. 

If you do not own your property for at least a year, you’ll be subject to a different type of tax called the short-term capital gains tax. This rate is the same as your income tax rate based on your income bracket and is almost always more than the long-term capital gains rate.

Other Taxes 

Capital gains are not the only types of taxes you will pay when you sell Breckenridge homes for sale. You could also be looking at depreciation recapture tax, prorations for annual property taxes due, and taxes specific to the state in which you live. 

The possibility of double taxation is also a possibility for some investors who live out of state and who plan to sell Breckenridge real estate. This occurs when you live in a state that has an income tax and requires you to report it. This tax would be separate from the tax in the state of Colorado. There are ways to mitigate double taxation, such as taking a credit for state income tax paid in another state. Keep in mind there are limits on the amount of credit you can take (if your state allows you to take it at all). 

Another tax issue for those selling a Colorado property but who live in another state is mandatory state withholdings. This is based on the gross sale of your property rather than the gross profit. These withholdings are usually not refunded until your tax return is filed for the year and can delay the cash you will receive after the sale of your property.

Getting Help

Suppose you are a first-time out-of-state seller of Breckenridge real estate and are confused about the tax implications. In that case, it’s always best to work with both a CPA who is knowledgeable about out-of-state transactions and an experienced Breckenridge real estate broker who specializes in helping out-of-state sellers. When you work with experts, you can get all the information and advice you need to make smart decisions and avoid paying unnecessary taxes.

Tips on Selling Breckenridge Homes

Though the local market is hot, that doesn’t mean you can cut corners when preparing Breckenridge homes for sale. To ensure you make the most on your property, keep in mind the following tips:

◾ Price it right. 
Some sellers think they can inflate the price of their homes in a competitive market, but this is a bad idea. The best way to drive traffic to your listing and encourage offers is to price it appropriately. The best way to do so is to have your Breckenridge real estate broker do a comparative market analysis that looks at similar properties that have recently sold in the area in an attempt to arrive at the best price.

◾ Stage it. 
Breckenridge homes for sale that are professionally staged sell for more and spend less time on the market. A stager will ensure potential buyers can visualize themselves living in your home by adding, removing, or rearranging furniture and décor. If you prefer not to hire a pro, you can still experience some of the same benefits by staging your home yourself or having it virtually staged.

◾ Market it online. 
Just as there are many owners like you who don’t live in Colorado, there are also plenty of interested buyers of Breckenridge homes for sale that live out of state. To appeal to them — as well as to local buyers who prefer to shop online — you need a robust marketing campaign that includes a landing page, social media ads, Google ads, and other strategies to drive traffic to your listing. To make sure your online campaign is effective, you’ll need high-quality images and videos taken by professionals who know what it takes to make your Breckenridge property shine online.

◾ Work with an experienced Breckenridge real estate broker. 
As an out-of-state seller, the last thing you want to do is have the stress of selling your home by yourself. When you work with a local broker, you benefit from their knowledge and experience and can leave all the work to someone who knows how to best take advantage of the local market.

Now is the perfect time to list Breckenridge homes for sale to appeal to many prospective buyers looking for property in the area. To make sure your out-of-state transaction goes as smoothly as possible, reach out to an experienced agent like Maureen Lathrop or Joe Alvine for expert guidance.


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