Everybody wants to save money from all transactions as much as possible. But saving money from selling your home? Is that even possible?
Yes, you heard it right! You can save money thru tax deductions from selling your home.
How does it work?.
The Government passed a bill named Tax Cuts and Jobs Act in 2018 which made an impact on homeowners. But even if you are to sell your home today or even in the future - you may still save an ample amount thru tax deductions. See the list we have compiled below to see how can we utilize it.
1. SELLING COSTS
These are deductions directly tied to the sale of the home. These may include legal fees, escrow fees, advertising costs, home staging fees and real estate agents commissions. There's a catch however, you must have lived in the house for at least 2 years of the 5 years prior to selling and the house must be a primary residence and not an investment asset. And remember to keep all receipts from these transactions.
2. HOME IMPROVEMENTS AND REPAIRS
Renovation costs such as house painting, HVAC and roof repair can be deducted as well given that you have applied these upgrades within 90 days of closing. Don't forget to keep your receipts.
3. PROPERTY TAXES
If you have been paying your property taxes until the sale of your home, then you can deduct the sum of money you paid for property taxes last year up to a limit of $10,000 only.
4. MORTGAGE INTEREST
You can deduct the interest on your mortgage for the part of the year you owned the home. These can be explained thoroughly by our realtors. Check with them on the exact amount you can deduct as the 2018 Tax Code and its 2021 revision has a direct effect on these.
5. CAPITAL GAINS TAX FOR SELLERS
Simply put, capital gains is the profit from selling your house - the remaining cash after all expenses and outstanding mortgage debt are paid which is considered taxable as income.
But capital gains is not actually a deduction, it is an exclusion. You can exclude up to to $250,000 from the sale if you are single or $500,000 if you are married. Just take note that you must have lived in the house for at least 2 years of the past 5 years for you to be able to leverage this.
If you are planning to sell your home and want to save as much as possible, contact us. The Lovato Group Realtors are more than willing to assist you with your home selling process.
Note: The information shared in this blog contains important legal and tax consequences, we urge you to consult legal and tax or other counsel before applying these.
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