5 Tax Deductions You Can Take When Selling Your Home
If you're selling your home and you've got a decent amount of equity, you're probably looking forward to reaping a solid profit. But home seller gains can also come from another source: tax deductions on the sale. Check out the deductions that are available to you.
If you lived in your home for at least two of the five years prior to its sale, and it was also your principal residence—and not an investment property, you can deduct costs associated with selling your home. This includes legal fees, advertising costs, fees for home staging, escrow fees, and agent commissions. These fees are deducted from the sale price of your home, which reduces your capital gains tax.
Home Improvements and Repairs
If you renovated your residence try to make it more marketable, you can deduct those expenses, too. Renovations might include repairing the roof, replacing a water heater, painting the house, or remodeling the kitchen and bathroom. There's one catch, though: Timing is everything. You need to have performed those renovations within 90 days of the closing date.
You can deduct mortgage interest for the part of the year you owned your residence. Under the 2018 tax code, home sellers can deduct the interest on up to $750,000 of their mortgage debt. However, if you obtained your mortgage before Dec. 15, 2017, you can deduct interest on up to $1 million of your mortgage debt.
As long as you continued to pay your property taxes until you sold your home, you may deduct the amount you paid in property taxes the previous year. However, the amount is capped at $10,000 for all home sellers.
Capital Gains Tax for Sellers
Capital gains are your profits after selling your home—cash that's left after paying off your expenses and outstanding mortgage debt.
You may exclude as much as $250,000 of the capital gains from the sale of your home if you’re single, and $500,000 if you’re married. However, you must have lived in your residence for at least two of the previous five years.
(Always consult your tax accountant regarding tax laws that are specific to your personal finances).