The tax paid on the sale of investment property is called capital gains tax. Capital gains tax is calculated against the amount earned by property that increased in value by its nature and not by the virtue of the owner’s income, rental income or interest earnings. Capital gains tax rates are typically lower than income tax rates. Capital gains tax will usually become a consideration when someone sells stocks, bonds or real estate. Calculating capital gains tax liability can range from very simple to much more complex for some real estate.
Often when people make a purchase, over time it appreciates in value. When that item is sold, the government taxes on the increase in the value of the property. The tax that is assessed is called capital gains tax. Sometimes capital gains taxes discourage people from selling property as they don’t want to pay the capital gains tax. As a result of this, the government has a process that will sometimes allow for for capital gains taxes to be delayed.