Selling your home can be an exciting journey, but it often comes with its share of expenses. The good news? There are ways to save on taxes by making the most of available deductions. In fact, most homeowners enjoy a solid 36.3% return when they successfully sell their homes.
As you dive into the world of tax filings, here are some friendly tips to help you maximise your savings:
**1. Capital Gains Exclusion:** If your earnings from selling your primary residence are under $250,000 (or $500,000 for married couples), you can breathe easy knowing that you won't need to report them to the IRS. That's potentially up to $100,000 in savings. To qualify for this exclusion, all you need is to have lived in and owned your home for at least two of the last five years. The time spent in your home doesn't need to be consecutive either.
**2. Capital Improvement:** Adding meaningful upgrades to your home is a smart way to increase your cost basis, especially if you exceed the maximum limit for capital gains exclusion. Basic repairs and maintenance won't do the trick, but substantial improvements like upgrading your HVAC system, adding a new room, or renovating your kitchen can reduce your tax liability.
**3. Selling Costs:** The costs associated with selling a home, such as real estate commissions, can add up. You'll typically cover both the seller's and buyer's agent fees, which can total about 6% of your home's sale price. The good news is that you can deduct these expenses from your capital gains. Don't forget to consider other deductions like attorney fees, escrow fees, title insurance, advertising costs, recording fees, and inspection fees.
**4. Mortgage Interest & Property Taxes:** If your itemized deductions surpass the standard deduction for the year, you can deduct the interest on your mortgage loan. For homes purchased before December 15, 2017, this deduction can apply to loans of up to $1 million. For homes purchased after that date, the cap is $750,000 in mortgage debt.
**5. Avoiding Selling Costs Altogether:** If the thought of updating your home for sale feels daunting, consider an off-market sale. Selling off-market doesn't mean you have to settle for less than fair market value. At National Cash Offer, we're committed to providing our clients with the highest possible offers, without hidden fees. We can offer you a fair market value price and close homes in as little as 10 days, saving you the time and hassle of working with a realtor. Plus, if your home sale falls below the capital gains exclusion limit, you may not have to pay any taxes on it.
When it comes to selling your home, remember that there are various deductions and strategies available to help you make the most of your financial opportunities."