Will I have to pay capital gain taxes(California)?

I have 2 houses, one is my main house which I've owned for over 10+ years. I also own an investment property in california, which i bought jan 06. I sold my main house and am in the process of selling my investment property. I did the math and i should be getting back about 330k back after the sell and pay of the mortgage. the reason I am getting this much back is because i gave a pretty big down payment. Will i have to pay capital Gains when i sell the property? all information would be greatly appreaciated. Thanks in advance

You're probably ok on the investment property, but on your primary residence it depends on the amount of the gain - if its more than $250k for an individual and $500k for a married couple filing jointly then there will be a tax.

You have to look at each sale separately - Heres how it works:

You bought your home for $100,000 and paid $2,000 in costs 10 years ago and put $40,00 into a remodel with your tech stock winnings back in '97. You sell it now for $500,000 but you had to pay $30,000 in fees and commissions to get it sold.
You have a gain of 400,000 minus the $40,000 minus the $30,000 minus the $2,000. This makes a taxable gain of $328,000. You have the $250,000 exemption because you're single, so that knocks it down to $78,000. Note that this has everything to do withthe sales price - not the down payment.

Investment property works the same, but there is no exemption. You CAN do a 1031 tax deferred exchange and "roll" your tax obligation into your next property (while jumping through a bunch of hoops) but that only kicks the can down the road until you sell the next property.

(The big exception to the whole death/taxes thing is that if you die, then your heirs get a stepped up basis on these 1031ex properties and the accumulated tax bill goes poof!)

You are probably OK on your investment property because CA RE didn't jump up all that much in 06 and you should be able to scrape up enough transaction costs to offset any gain you may have had. If you really hit a home run on it, I would recommend the 1031 exchange.

IRS: Selling your Home Publication: http://www.irs.gov/publications/p523/ind... and http://www.irs.gov/publications/p523/ar0...
IRS: Home Sale Exclusion rules, publication: http://www.irs.gov/newsroom/article/0,,i...
IRS: Real & Personal Property Sales: http://www.ustreas.gov/auctions/irs/
IRS: Time to keep records: http://www.irs.gov/businesses/small/arti...
IRS: Contacting your local IRS office: http://www.irs.gov/localcontacts/index.h...
Buena Suerte

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