My eyes are about to fall out from googling capital gains information in relation to a home sale, and I still can't find what I'm looking for.
My hunch is that a taxable gain is, at is most basic level, the difference between what a home costs and what it was sold for.
Most of the capital gains calculators simply ask the original price of the home and the sale price, but here's the thing, what if you bought the house with a loan?
Example: Home purchased for $50k down + $350k loan. Three years later when the home is sold, there is $200k remaining on the loan. The home sells for $800k.
In calculating the gain from the example, it would seem that the $200k remaining loan balance is not part of the gain, i.e. the bank invested this money, and every last dime of the loan amount is going back to the bank, and not yours truly. ... And yet from what I've read, it seems that this loan amount is being included as part of my taxable gain.
Is the loan amount deductible, or am I really taxed on this money (that I never get to hold in my grubby little hands)?
I'm hoping one of you real estate Jedi masters might know the answer here, because I've tripped all the breakers in my brain trying to deduce the answer.