5 Tax Benefits for Home Sellers

Selling a home can result in some additional fees but it also can reward you with some great tax breaks! With the help of an accountant and the information below, you may find that you have some new deductions this tax season.

Improvements

Adding new windows, a new roof or even something smaller like a new water heater can be considered a capital improvement. Improvements are added to the basis price of your home. The basis is the purchase price of your home + capital improvements – depreciation. Your home’s basis is then used in figuring out the capital gain (selling price – closing costs – basis price) on the sale of your home. Capital improvements help to reduce your capital gains.

Capital Gains

The IRS taxes you on gains made from the sale of a house. The good news is that some of that gain is tax free! If you are married filling jointly you can claim up to $500,000 gains tax free. If you are filing single or married filing single you can claim $250,000 gains tax free. One qualification for this is you have to have lived in the home for 2 of the last 5 years. There are some exceptions to this qualification. A homeowner may be able to pro-rate their time in the house if they have to sell before the two-year mark due to certain circumstances. Divorce, disaster, war, job change, sickness and death are examples of those special circumstances.

Moving Expenses

If you are moving for work-related purposes and you are moving at least 50 miles closer to your workplace then you may be able to qualify some of your moving expenses. Mileage spent on the journey to the new home, moving supplies (boxes, truck or equipment) and professional mover fees can all be deducted.

Realtor Commissions

Realtor fees and commission can get quite significant depending on the selling price of your home but they can qualify as deductions. Commissions will lower your sale price which will then lower your capital gains. Even marketing and advertising costs associated with selling your home can be deducted.

Property Taxes

After selling your home, be sure to deduct property taxes for the amount of time that you lived in the home during the year. Many people don’t realize that they can still deduct property taxes after they move out of a home. Once settlement takes place the buyer then is responsible for taxes but for the portion of the year you lived in the house, you were responsible for taxes and therefore can deduct that portion.

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