It’s tax season, time for Tax Deductions, and just like the famous line from the movie Jerry Maguire, it’s time to “Show me the MONEY!” There are several Tax Deductions you should be aware of when you are selling your home. With a little research you could be saving quite a bit of money.
Costs related to Selling your home:
According to Joshua Zimmerman, president of Westwood Tax and Consulting, “You can deduct any costs associated with selling the home—including:
- legal fees
- escrow fees
- advertising costs such as Professional Home Staging
- real estate agent commissions
Cost of Repairs vs. Improvements:
Bill Gassett, the owner of Maximum Real Estate Exposure is a thirty one year veteran to the Real Estate Industry and has great wisdom to share regarding Repairs and Improvements. “It is essential to understand that the IRS treats Repairs vs. Improvements differently.
- An Improvement is something that makes a property more valuable to own and are deducted over the course of multiple years.
- A repair is required maintenance to keep the property functioning normally and can be deducted immediately in the tax year of your home sale.
“If you needed to make home improvements in order to sell your home, you can deduct those expenses as selling costs as long as they were made within 90 days of the closing,” says Zimmelman.
Property Taxes & Mortgage Interest:
If you are current with your Property Taxes at the time of the sale you may deduct the amount you paid in property taxes for the time you owned it. But keep in mind that with the new Tax Law your total deductions are capped at $10,000.
As with property taxes, you can deduct the interest on your mortgage (up to a maximum of $1 million) for the portion of the year you owned your home.
The 2018 tax changes now allow New homeowners and Sellers to deduct the interest on up to only $750,000 of mortgage debt. Zimmerman notes that “homeowners who got their mortgage before Dec. 15, 2017, can continue deducting up to the original $1 million amount.”
The Biggest Financial Benefit is not a Deduction.
It’s an Exclusion according to Bill Gassett.
It is possible to avoid real estate capital gains tax with the sale of your current home. Keep in mind this is more of an Exclusion than a Deduction. Remember, capital gains are your profits from selling your home after paying off your expenses and any outstanding mortgage debt. The profits will be taxed as income.
- You can exclude up to $250,000 of the capital gains from the sale if you’re single
- You can exclude up to $500,000 of the capital gains from the sale if $500,000 if married.
- You must have lived in your home at least two of the past five years.
Selling your home can be overwhelming so it is important to have the most accurate information to ease the process. Build a knowledgeable team of experts to assist you as you take this journey. Doing a little bit of research could save you some money.
Professional Home Staging can be Tax Deductible
In conclusion, Professional Home Staging is an advertising and marketing expense incurred during the sale of the home and therefore CAN be written off on taxes. It’s important to note that to be deductible the Home Stage must be performed by a Professional Home Staging provider. For further information contact your accountant and view IRS Publication 523 “Selling Your Home”.
Professional Home Stager Claudia Jacobs of Claudia Jacobs Designs found in her research that the “IRS’ position is that Staging costs are a legitimate selling expense for both primary and secondary homes and are therefore tax deductible. However, it is important to note that if a house is staged and then taken off the market, the staging expenses are not tax deductible.”