Note: The tax deadline has already passed this year, but this is some great information you can apply to future tax filing. Or if you were a little lazy and didn’t file yet.
According to the National Association of Realtors, about 5.51 million existing homes and 612,000 new homes were sold in the United States in 2017.
Since it’s tax season, these numbers indicate something a bit more interesting than just your average real estate statistics, at least to the people who sold the home. When filing for a tax return, the expected goal is to check off as many boxes as possible—literally and figuratively—in order to maximize your refund.
Since homes are generally worth a lot of money, you normally have to pay taxes on the sale if you’re a seller. However, there are tax write offs for sellers in place, you just need to figure out what your exemptions are.
1. You Sold Your House
Yes, it is quite simple. If you sold your house in 2017, then you’re likely exempt from having to pay taxes on a hefty portion of the sale. The exemption indicates that people who lived in the property for at least two years and haven’t used this exemption on a home sale made within the past two years don’t have to pay taxes on a portion of the house. For single filers, the portion is $250,000 and for joint filers, it’s $500,000. This is a pretty generous amount, especially since the median cost of a home in the United States is around $200,000.
If you don’t meet the requirements listed above, you still have a chance to save money on taxes. For instance, if you lived in the house for less than two years but have a legitimate reason preventing you from doing so, like illness, divorce, or a loss of employment, then you can still be exempt from a portion of the $250,000 or $500,000, not then entire sale.
In addition to saving money from this exemption, you can also write off your real estate agent’s commission while filing, as long as you hired one. Additionally, you can write off fees associated with advertising, closing, moving, and inspecting, just make sure to keep all of the receipts handy and understand what happens when you sell a house!
2. You Renovated Before You Sold
Before you go ahead and write off every piece of work you did on the house prior to selling it, understand what and what does not meet the write off requirements. First, the renovations need to have been made within 90 days of you closing on the house. Second, the renovations can’t be “necessary” or required to keep the home safe and secure. For instance, fixing the plumbing that hasn’t been updated in a long time might not be included. However, adding in hardwood floors to replace a carpet with a dingy color might be.
Whether it’s tax season or not, keeping on top of your finances is important for gliding through life while avoiding the hiccups that can come with poor financial management and planning.