What Expenses Can I Deduct When Selling a Home?
While selling a home can be quite costly, there are many ways that you can save when it comes to taxes by deducting your expenses. Typically, homeowners earn a 36.3% return when they sell their homes.
When filing, there are many tax deductions that you can make to save a fair amount of cash.
Capital Gains Exclusion
If you make less than $250,000 or $500,000 if you are a married couple from selling a home that is your primary residence, you will not need to report any of your earnings to the IRS.
Typically, long-term capital gains are taxed at 20%, meaning you could save up to $100,000.
To benefit from capital gains exclusion, you must have lived in and owned your home for at least two out of the past five years. The amount of time you live in your home does not need to be consecutive either.
Adding capital improvements is a great way to increase your cost basis if you made more than the maximum amount for capital gains exclusion. Of course, these particular renovations must have increased the value of your home by a meaningful amount. Simple repairs, decorations, or maintenance, do not count.
If you upgraded your HVAC system, added a new room, or updated the kitchen with new appliances, you can reduce the amount of taxes you owe.
Selling costs, such as real estate commissions, can be very costly. You will need to cover both the seller’s agent and buyer’s agent fees when selling your home, which can be about 6% of the sale price of your home.
Luckily, you can deduct these fees from capital gains. Some other deductions you might want to make when selling your home include:
- Attorney fees
- Escrow fees
- Title insurance
- Advertising Costs
- Recording fees
- Inspection fees
Mortgage Interest & Property Taxes
If your itemized deductions exceed the standard deduction for that year, you’ll be able to deduce your mortgage loan’s interest.
Any homes purchased prior to December 15, 2017, can be deducted in interest by up to $1 million. Homes purchased after that data have a $750,000 mortgage debt cap.
Avoiding Selling Costs Altogether
If you don’t have the cash or time to update your distressed home and get it ready for selling, you might consider selling your home off-market. Of course, just because you are selling off-market does not mean that you have to sell your home for less than the fair market value.
Here at National Cash Offer, our goal is to provide our clients with the highest possible offers. We don’t have any hidden fees and we can provide you with a fair market value price. We’ve closed homes with our clients in as little as 10 days.
You don’t need to spend time or money working with a realtor or go through the hassle of making your home ready to sell. Plus, if you earn less from the sale of your home than the capital gains exclusion limit states, you won’t have to pay any taxes on it!
Get in touch with us today to learn more.