Cap. Gains on Real Estate w/HELOC attached

[dschwartz69]

Arizona - I may soon be selling a house that I formerly lived in but am now renting out. Because we lived in the house less than 2 of the ast 5 years (and have no plans to move back into the house), I understand that I am responsible for the capital gains on the proceeds of the house sale.

My question is: are cap. gains determined directly from the SellingPrice - (Purchase Price + Improvements)? We currently have a Home Equity Line of Credit on that house that was taken out before we began renting. When I'm estimating Cap Gains, should I subtrace what it costs to pay off the HELOC (at the time of sale) before apply the cap gains percentage or does that not factor in?

thanks,

David.

 

[abezon]

Mortgages are irrelevant. Your gain is the selling price - costs of sale - adjusted basis. Adjusted basis is the original purchase price + costs of purchase + improvements - depreciation allowed or allowable.