Putting your home on the market? Understand the tax consequences of a sale.


As the school year draws to a close and the days lengthen, you may be one of the many homeowners who are getting ready to put their home on the market. After all, in many locales, summer is the best time of year to sell a home. But it’s important to think not only about the potential profit (or loss) from a sale, but also about the tax consequences.

Gains

If you’re selling your principal residence, you can exclude up to $250,000 ($500,000 for joint filers) of gain — as long as you meet certain tests. Gain that qualifies for exclusion also is excluded from the 3.8% net investment income tax.

To support an accurate tax basis, be sure to maintain thorough records, including information on your original cost and subsequent improvements, reduced by any casualty losses and depreciation claimed based on business use. Keep in mind that gain that’s allocable to a period of “nonqualified” use generally isn’t excludable.

Losses

A loss on the sale of your principal residence generally isn’t deductible. But if part of your home is rented out or used exclusively for your business, the loss attributable to that portion may be deductible.

Second homes

If you’re selling a second home, be aware that it won’t be eligible for the gain exclusion. But if it qualifies as a rental property, it can be considered a business asset. You might want to fix and improve all the areas from your house to get a better deal, just with a few touch ups and your house will be ready for the market, with Driveways Warrington you can get great deals on improvements.  Also it’s important to know that you may be able to defer tax on any gains through an installment sale or a Section 1031 exchange.Image result for house taxes

Or you may be able to deduct a loss. When you make a home improvement such as installing central air conditioning, adding a sunroom, replacing the roof  which you can do with Ocean Seven Roofing to get the best service and also get a deduct and don’t loose but remember  you can’t deduct the cost in the year you spend the money. But if you keep track of those expenses, they may help you reduce your taxes in the year you sell your house.

For example one big change it’s done almost every time a house is on the market is the improving curb appeal  which is to make the house look way appealing for the buyers, so keep track of your expenses as you will need all those costs at the end of the year.

Learn more

If you’re considering putting your home on the market, please contact us to learn more about the potential tax consequences of a sale.