Selling your home and moving can be expensive, but many of the costs may be deductible. The IRS offers 10 tax tips on deducting some of those selling expenses or profits.
- In general, you are eligible to exclude the gain from income if you have owned and used your home as your main home for two years out of the five years prior to the date of its sale.
- If you have a gain from the sale of your main home, you may be able to exclude up to $250,000 of the gain from your income ($500,000 on a joint return in most cases).
- You are not eligible for the exclusion if you excluded the gain from the sale of another home during the two-year period prior to the sale of your home.
- If you can exclude all of the gain, you do not need to report the sale on your tax return.
- If you have a gain that cannot be excluded, it is taxable. You must report it on Form 1040, Schedule D, Capital Gains and Losses.
- You cannot deduct a loss from the sale of your main home.
- Worksheets are included in Publication 523, Selling Your Home, to help you figure the adjusted basis of the home you sold, the gain (or loss) on the sale, and the gain that you can exclude.
- If you have more than one home, you can exclude a gain only from the sale of your main home. You must pay tax on the gain from selling any other home. If you have two homes and live in both of them, your main home is ordinarily the one you live in most of the time.
- If you received the first-time homebuyer credit and within 36 months of the date of purchase, the property is no longer used as your principal residence, you are required to repay the credit. Repayment of the full credit is due with the income tax return for the year the home ceased to be your principal residence, using Form 5405, First-Time Homebuyer Credit and Repayment of the Credit. The full amount of the credit is reflected as additional tax on that year's tax return.
- When you move, be sure to update your address with the IRS and the U.S. Postal Service to ensure you receive refunds or correspondence from the IRS. Use Form 8822, Change of Address, to notify the IRS of your address change.
For more information about selling your home, see IRS Publication 523, Selling Your Home. This publication is available at www.irs.gov or by calling 800-TAX-FORM (800-829-3676).
In today's tough real estate market, you must do things to make your home stand out from the crowd. Home Staging has become a popular way to make your home stand out from the crowded listing inventory.
When we hear the word "Staging", we tend to automatically think that means we need someone else to come in and decorate, and add even more costs to the expense column when it comes to selling a property. But this is not the case. You can do some things yourself to improve your chances of selling your home.
- Set your listing price by utilizing area comparables, not based upon what you need to get for your home.
- Repair squeaky doors, chipped or smudged paint as well as broken fixtures and fittings that you've neglected.
- Get rid of worn carpets, and consider refinishing shabby hardwood floors. An inexpensive new area rug is a quick fix and can disguise the look of old floors.
- Invest in a fresh coat of paint and get 150 percent green back on your investment.
- Fix all running toilets, or risk flushing profits down the drain.
- Remember that "outside" is the new "inside." Show off all of your living spaces. It's your first chance to make a good impression, so you've got to make it count.
- Renew the look of rooms by replacing old or dated light fixtures, door hardware, light switches and outlets.
- Grind a lemon in the garbage disposal – it smells great and it's cheaper than air freshner.
- Display the kind of plants that aren't injection-molded and painted in a factory somewhere.
- Make things sparkle. Remember that people will look in your cupboards, under your sinks and in your closets. Mop, dust, vacuum, wash windows, baseboards, and anything else that a potential buyer may see as a turn-off.
Paying attention to these few things will help you be ahead of the crowd when potential buyers compare your home against others for sale.
When you decide to sell your home, you need to know what the cost basis of the home is, because it needs to be noted on your income tax return for the year you sell your home.
When you are considering selling your home, taxes are probably not the first thing on your mind. Taxes are involved in some way, whether you gain or lose money from a real estate transaction. Enter the term 'cost basis.'
In the United States, cost basis is a tax law term. The original price you paid for your home is what the basis is considered. Factors such as a home's appreciation or depreciation is where the cost portion of the calculation is taken into account and also adjusted for.
You, as a taxpayer, will end up paying taxes on a capital gain when you sell your property and your home has appreciated in value. Subtracting the money paid for the property's original value or basis, this is equal to the amount of money you gained on the sale. You, as a taxpayer, will end up saving on taxes from any loss you may have suffered if, when you sell your property, your home has depreciated in value. With the property's original basis factored in, this is again equal to the amount of money you lost on the sale.
It does not matter if the property is encumbered by a debt in this equation. The home's original cost, plus or minus any profit or loss realized at its sale, is all that matters. Any costs associated with the selling of your home can also be subtracted. The calculation has the possibility of being a little confusing, even if the figures seem relatively straightforward, especially if you don't have the strongest math skills. Contacting a tax specialist is the best way to ensure you understand your tax obligations.
You may qualify for a one time exemption on any gains when you sell your home, so again, consult with a CPA or tax professional for details on how your particular tax situation needs to be handled when you sell your home.
