Capital gains taxes are taxes owed on the difference between the amount you paid for something and the amount you sold it for. If you made money on the transaction, that money is called a capital gain. Capital gains taxes apply to everything, but are particularly important in real estate because of the size and conspicuousness of gains made through property sales. Rental properties are different from others — if you are selling a rental property, you'll need to take into account the property's "depreciations" over the years.
Begin with the price for which you originally bought the property.
Add the cost of any improvements you've made while you've owned the property, as well as any costs incurred in the process of selling it.
Subtract the depreciation for the property you've claimed on your taxes over the years. Depreciation is money you deduct from your taxes to cover the costs of income-producing property. It's important to claim depreciation, as the federal government considers it in calculating your capital gains tax whether or not you actually got deductions for it.
Subtract the number you arrived at in Steps 1 through 3 from the price you sold the property for. This is your capital gain for the sale. Remember that some of this amount is from depreciations; that amount will be taxed at a different rate from all the rest. For example, if you made a $200,000 capital gain with $30,000 of depreciations, that $30,000 will be taxed at depreciation rates and the remaining $170,000 at standard capital gains rates.
Use the number arrived at above when computing capital gains taxes on your tax forms. Some states have special state capital gains requirements in addition to the federal tax. Make sure you read your state tax information carefully.
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