Selling Your House Might Save You Money When You File Your Taxes

Getting your house ready to sell and finding a buyer can be expensive, but those costs can reduce the amount you have to pay for income taxes. Here are some things you should know.

Expenses Related to a Home Sale
If the house that you sold was your principal residence and you lived there for at least two of the past five years, you’ll be able to deduct expenses that you incurred to sell the property. Those can include repairs that you made within 90 days of your closing date, as well as fees for staging, advertising, a home inspection, and title insurance. Your real estate agent’s commission and legal fees can also help you save money on your taxes.

Improvements You Made While You Owned the House
Your home’s cost basis is the amount you paid for the property, plus the amount that you spent on improvements. To figure out your capital gain or loss, you’ll deduct your selling expenses and your basis from the amount you received from the sale of your house. That will determine how much, if anything, you owe in capital gains tax.

Capital gains are the profit that you made when you sold your house. A gain is treated as taxable income. You’ll be able to exclude up to $250,000 in capital gains if you’re single and up to $500,000 if you’re married and file a joint tax return, provided you lived in your old home for at least two of the previous five years and didn’t exclude capital gains on the sale of another home within the past two years.

Property Taxes and Mortgage Interest
If you paid property taxes on your old home before you sold it, you’ll be able to deduct them when you file your taxes, up to a maximum of $10,000. You’ll also be allowed to deduct interest on up to $750,000 of mortgage debt if you took out your loan after December 15, 2017, and interest on up to $1 million in home debt if you took out your mortgage before that date.

To take advantage of these options, you’ll have to itemize your deductions when you file your taxes. That will only make sense for you if the sum of your itemized deductions is greater than the standard deduction.

Discuss Your Tax Situation With an Accountant
The tax code is complicated, and laws can change at any time. Other circumstances, such as the reason why you sold your house, can affect your eligibility for tax deductions and exclusions. If you have questions about your specific circumstances, consult an accountant to get personalized guidance.

For more real estate information, including FREE Market Area Statistics, please contact me at Nazneen@LNF.com or on my mobile phone at 7034241980.