Question
After selling rental property, is equity [final sale - principal left on mortgage] taxed as income? I know there's capital tax, but that basically= [final $ - original $]
We didn't pull out equity, it's just the equity that came out as a result of selling the property for more than what the remaining principal on the mortgage was (a lower value than what we originally paid to buy the house, which is what I understand Capital Gains tax to be). So if house was bought for $1000, sold for $1100, then capital gains tax would be a tax on $100. Let's say amount left on mortgage principal was $800. Does this mean we pocket $300 (only $100 of which is taxed for capital gains) after selling the home at $1100?
