{"id":823,"date":"2019-09-03T12:36:50","date_gmt":"2019-09-03T16:36:50","guid":{"rendered":"https:\/\/fluentricciardi.com\/?p=823"},"modified":"2022-01-27T12:37:46","modified_gmt":"2022-01-27T16:37:46","slug":"tax-deductible-home-selling","status":"publish","type":"post","link":"https:\/\/fluentricciardi.com\/tax-deductible-home-selling\/","title":{"rendered":"Tax Deductible Home Selling"},"content":{"rendered":"

Which Items are Tax Deductible when Selling a House?<\/strong><\/p>\n

When you list your house on the market, you\u2019re probably thinking about how much money you\u2019ll make or where you want to move next, not about your taxes. A home sale does have tax implications which can either help or hurt you in April.<\/p>\n

<\/p>\n

Find out everything you need to know about selling a house and personal income taxes before you plan on spending the profits from selling your home.<\/p>\n

Which Common Home Selling Costs are Deductible?<\/strong><\/p>\n

Not all of the costs related to a home sale are deductible. Here are the costs which can be used to offset any profit and reduce your tax burden.<\/p>\n

Repairs Related to the Home Sale<\/i><\/strong>. If your realtor insisted that you fix the wobbling back handrail, patch and paint the walls, or make other repairs before listing those costs can be deducted. However, these repairs must have taken place within 90 days of close.<\/p>\n

Home Improvements<\/strong>.<\/i>\u00a0While 100% of repairs are eligible for deduction in the year you sell the home, the IRS treats improvements differently. Improvements such as adding a deck, installing A\/C, or upgrading your kitchen countertops, are only eligible for deduction over a number of years. Talk to your accountant about setting up a depreciation and deduction schedule for them.<\/p>\n

Mortgage Interest<\/i><\/strong>.<\/i>\u00a0Don\u2019t worry, even if you sold your home mid-year you can still deduct the mortgage interest you paid during the year\u2019s first half. The same applies to property taxes.<\/p>\n

Realtor Commissions<\/strong>.<\/i>\u00a0Nationwide, the average realtor commission you\u2019ll pay is 6%. It\u2019s split between the buyer and the seller\u2019s agent, so even if you decide to sell by owner, you\u2019ll pay 3%.<\/p>\n

Points<\/i><\/strong>: If you paid mortgage interest, or points, upfront when you bought the house and are still amortizing their deduction, you can take the remaining amount in one lump deduction the year you sell.<\/p>\n

Legal Fees<\/strong>.\u00a0<\/i>Depending on the complexity of your home sale, you might have to pay a lawyer to prepare and review documents. These fees can be deducted.<\/p>\n

Title Insurance<\/strong>.\u00a0<\/i>Any title insurance you purchased qualified as a deduction.<\/p>\n

Advertising Costs<\/strong>.\u00a0<\/i>This deduction will be particularly helpful if you went the \u201cFor Sale by Owner\u201d route and paid significant advertising costs. As long as they can be directly related to your sale, you can deduct them.<\/p>\n

Escrow Fees<\/strong>.\u00a0<\/i>Any fees related to setting up and maintaining an escrow account before close can also be deducted.<\/p>\n

If you plan on deducting any of these above expenses, make sure that you keep excellent records. Insist that your handyman provides you with an itemized invoice for repairs done related to selling, don\u2019t lose receipts for paint from Home Depot, and give them all to your accountant at tax time.<\/p>\n

Will I pay Capital Gains on my Home Sale?<\/strong><\/p>\n

The tax code contains a\u00a0capital gains exclusion<\/a>, which helps homeowners avoid paying taxes on the profit from their home sale. Up to $250,000 of the profit that a single homeowner makes on their sale, and up to $500,000 for married homeowners filing jointly, can be excluded from their taxes. However, the home had to be your primary residence for two out the last five years before sale.<\/p>\n

What if I took a Home Office Deduction?<\/strong><\/p>\n

Many independent contractors or self-employed professionals write off a portion of their home on their taxes. The simplified deduction, for home offices of 300 square feet or less, is $5 per square foot. The more complicated method takes actual costs against the home\u2019s overall expenses, allowing you to deduct a portion of your mortgage interest, maintenance and repairs, property taxes, insurance, utilities, and other expenses.<\/p>\n

If you sell a property where you\u2019ve been taking a home office deduction, you don\u2019t have to break your profit between the personal and professional square footage for tax purposes. Since this profit is more likely than not to qualify for the home sale tax exclusion, you don\u2019t have to worry about a thing.<\/p>\n

But what if you converted an old garden shed to your home office? Or built one above the garage? You do have to break out home offices not located within the four walls of the main house from your personal profit. You\u2019ll have to allocate a portion of the gains on your sale to your home office, and you\u2019ll owe taxes on this profit.<\/p>\n

As well, if you lose the home office deduction, or the size of your home office will change, you\u2019ll need to plan for how this will affect your taxes. Talk to your CPA or accounting professional for specific guidance.<\/p>\n

What about my Depreciation Deductions?<\/strong><\/p>\n

One of the perks of writing off a home office on your taxes, deducting depreciation, will hurt you when it comes time to sell the house. Recaptured deductions are taxed at a 25% rate. This may look high, but could often be the same or less than the tax you would have paid if you hadn\u2019t taken the deduction.<\/p>\n

Selling a house is a large and complicated transaction. If you have concerns about its impact upon your personal or business income taxes, consult with a professional. They can offer advice for tax planning and reducing any negative effects from your home sale.<\/p>\n","protected":false},"excerpt":{"rendered":"

Which Items are Tax Deductible when Selling a House? When you list your house on the market, you\u2019re probably thinking about how much money you\u2019ll make or where you want to move next, not about your taxes. 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