TAX DEDUCTIONS TO KNOW ABOUT WHEN YOU’RE SELLING YOUR HOME

DEDUCTIONS FOR SELLERS LIKE IMPROVEMENTS AND REPAIRS, PROPERTY TAXES, AND MORE

Selling your home can be very exciting and rewarding. You’re making a big change, and you might even be moving into your dream home.

There are other things—financial things—to be excited about. Equity is a beautiful thing, and since you’re likely to make some money when selling your home, it’s important to know how big the IRS’ cut will be. Luckily, you’ll likely be able to take advantage of some tax deductions when you sell your home. Here are tax deductions to be aware of when you’re selling a home.

Please Note: While we’re well-versed in all things real estate, we recommend reaching out to your accountant for information about qualifying for these benefits and more information about opportunities in your state and for your specific situation. The purpose of this article is to let you know what’s out there and available to sellers, so that you can be informed when discussing your options with a tax professional.

1| SELLING COSTS

We know selling your home is hard work—so you’ll be happy to know you that you might be able to get compensated for it in the form of tax deductions! You can deduct costs associated with selling your home, including legal fees, and real estate commission. There are certain guidelines you have to meet, such as living in the property for a number of years before the sale and the property serving as your primary residence. Learn more here.

2| IMPROVEMENTS AND REPAIRS

Did you fix up your home to make it a more attractive property to potential buyers? You can deduct those remodeling and repair costs. There are different rules for repairs vs. improvements. For instance, repairs can be immediately deducted the year of your home sale.

3| PROPERTY TAXES

You can deduct the amount you paid in property taxes over the past year. Note, though, that there’s a $10,000 cap on this.

4| MORTGAGE INTEREST

This is the moment you’ll be thankful you kept all your important home documents on-hand! You can possibly deduct your mortgage interest incurred from the year that you sell your home. There is a limit, but it’s so high that it will likely not apply to you.

5| CAPITAL GAINS TAX

We’re listing this among deductions, but it’s technically an exclusion. As The Balance says, “The Internal Revenue Service allows homeowners to exclude up to $250,000 in profit from capital gains tax when they sell their residences subject to certain qualifying rules or ‘tests.’ This increases to $500,000 for married taxpayers who file joint returns.”

Capital gains tax is complicated and varies based on your location, so make sure to work with a local, experienced accountant to make the most out of this.

6| MILITARY MOVING EXPENSES

Active duty military personnel might be able to deduct moving expenses if you had to sell your home in order to move for work.

We know that tax deductions, rules, and regulations can be complicated so we will always recommend that you use this information as a starting point for a conversation with an experienced accountant that can help you get the most out of your home sale. And if you’re just starting to think about selling your home, give us a call at (608) 957-2683. We’d love to help you sell your home quickly and efficiently, and give you more information to help you take advantage of any tax benefits available.