Fall can be a strategic time to prepare your home for sale and maximize your tax benefits, despite the perceived slowdown in the housing market as summer concludes. With careful planning and professional guidance from David A. Santini, CPA LLC, you can take advantage of various tax benefits to maximize your financial gain when selling your home this time of year.
One of the most advantageous tax benefits for home sellers is the Capital Gains Exclusion. Have you lived in your home for at least two of the last five years? You may be eligible to exclude up to $250,000 of profit from your taxable income if you’re single, or $500,000 if you’re married and filing jointly. This can significantly reduce your financial burden.
Many expenses related to a home sale can be deducted from your taxable gain. Agent commissions, legal fees, advertising expenses, and necessary repairs are some examples of qualifying deductions. Keep detailed records of these expenses to maximize your deductions.
Understanding the impact of selling your home on mortgage interest and property tax deductions is vital. Any prepaid mortgage interest and property taxes at the time of sale can be deducted, lowering your overall tax liability.
Home improvements that add value, prolong a home’s useful life, or adapt it to new uses can be added to your home’s cost basis and reduce your capital gains tax when you sell. Examples include modernizing the kitchen or bathroom, or installing energy-efficient windows and exterior doors, which can qualify for a residential energy credit on your taxes.
Work closely with a knowledgeable tax professional to fully leverage these opportunities and minimize your tax burden when you sell your home.