Selling your home?
Then you obviously want to pay as little as possible taxes from the profit you make off of selling your home in New England.
The good news is, there are quite a few tax deductions and exclusions for sellers.
And here, we’re going to walk you through 6 of the main ones — these will help you pay less taxes and take home more money when you sell your house.
Here they are!
By the way, if you want to sell your house fast for a fair cash price, give us a call at (781) 549-0271. We operate directly in New England, can make you a fair offer within 48 hours, and we can close in as little as two weeks!
1. Capital Gains Exclusion
The almighty Wikipedia defines Capital Gains as an “economic concept defined as the profit earned on the sale of an asset which has increased in value over the holding period.”
It’s the profit you make when you sell.
So if you bought your home for $100,000 and you sell for $150,000, you’d make $50,000 in profit (minus the costs of selling).
Here’s the good news: the Capital Gains Exclusion allows single person’s to exclude up to $250,000 worth of gain and married couples to exclude $500,000 worth of gain from their taxes.
The only caveat is that the property has to have been your primary residence for two out of the previous five years — but those years don’t need to be consecutive.
This is probably how you’ll save the most money.
2. Partial Capital Gain Exclusion
Okay… but what if you didn’t live in the property for two of the last five years?
Well, you still might qualify for a partial exclusion.
According to Homelight,
“Let’s say you haven’t had the opportunity to own or live in your house for two of the last five years before the date of sale. The IRS says you may still qualify for a partial exclusion of gain.
To qualify, your main reason for selling your home must be a change in workplace location, a health issue, or an unforeseeable event.”
If that applies to you, then definitely speak with a CPA to figure out whether you’re qualify for a partial exclusion.
3. Selling Costs
Selling a home is sort of like running a business — you’ll only pay taxes on the profit you make (and even that’s not entirely true if you qualify for the Capital Gains Exclusion).
And the formula for calculating profit looks something like this…
Profit = Total Income – Costs
In other words, selling costs aren’t included in your profit… which means you don’t need to pay taxes on them.
Here’s a list from NOLO of the selling costs you can write off…
- Appraisal fees
- Attorney fees
- Closing fees
- Document preparation fees
- Escrow fees
- Mortgage satisfaction fees
- Notary fees
- Points paid by seller to obtain financing for buyer
- Real estate broker’s commission
- Recording fees (if paid by the seller)
- Costs of removing title clouds
- Settlement fees
- Title search fees, and
- Transfer or stamp taxes charged by city, county, or state governments.
Make sure to keep your receipts!
4. Mortgage Interest
Obviously, you won’t be paying your mortgage any longer after you sell the home, but you can still write off any mortgage interest you paid while you owned the home.
So make sure that info gets included on your tax return.
5. Property Taxes
You can also write off your property taxes you paid while you still owned the home.
The easiest way to get ahold of your property tax info is probably through your billing statements or banking statements.
6. Home Improvements
You can also write off home improvements you made to the property so long as they were made with the intent to increase the value of the property.
Here’s how Homelight explains the difference between repairs (non-tax-deductible) and capital improvements (tax deductible)…
“Think of repairs as reactive projects you take on when something breaks. Capital improvements, in contrast, aren’t reactive repair projects but rather forward-thinking and intentional projects done with the intention to add value.”
And here are some things that might fit the bill…
- New bedroom, bathroom, deck, garage, porch, or patio
- New landscaping, driveway, walkway, fence, retaining wall or swimming pool
- New storm windows or doors, roofing, siding, or satellite dish
- New attic, walls, floors, or pipes and ductwork
- New HVAC, furnace, central humidifier, central vacuum, air/water filtration systems, wiring, security system, or lawn sprinkler system
- New plumbing, septic system, water heater, soft water system, or filtration system
- New built-in appliances, kitchen modernization, flooring, wall-to-wall carpeting, or fireplace
However, Realtor.com recommends only excluding improvement costs done within 90 days of closing…
“If you needed to make home improvements in order to sell your home, you can deduct those expenses as selling costs as long as they were made within 90 days of the closing.”
We recommend talking to a CPA to determine which home improvement projects are tax deductible and which ones aren’t.
Naturally, you want to save as much money in taxes as you can when you sell your home.
It’s your asset, after all, and you should have every right to take home as much profit as possible.
The above 6 tax deductions will help!
And if you want to get a fair cash offer for your home, give us a call at (781) 549-0271 — we can make you an offer within 48 hours, buy as-is, and close in as little as two weeks!
Who is Old Harbor Properties?
We are local New England residents that focus on buying properties off-market (with no commissions) for cash. We are not “flippers” or “investors” looking to pay pennies on the dollar. We are local Sox fans with families and we focus on buying rental properties. This allows us to make fair market value offers based on comparable sales and needed repairs. If you want to sell the property where you’re currently living, give us a call at (781) 208-7362 we can make you a fair cash offer, buy as-is, and close in as little as two weeks!