Tax Deductions
With the year 2020 now in the rearview mirror, its almost time to start thinking about filing your income taxes. If you have recently moved – or if you plan to do so in the future – you may find that there are some tax-related benefits (tax deductions) on both the buying and selling end of the deal.
As a home seller, there are some selling-related costs that could be deductible or excluded on your tax return – provided that you have lived in the home for at least two out of the past five years preceding the sale. These items can include:
- Escrow fees
- Marketing/advertising expenses
- Legal fees
- “Staging” costs (i.e., adding furniture or other items to make the home look more appealing to potential purchasers)
- Real estate agent or broker commissions
- Repairs and improvements (as long as these were completed within 90 days of the closing)
- Property taxes (up to $10,000)
- Capital gains tax
As a home buyer, there are also some options for deducting certain expenses, receiving tax credits, and/or allowing you to reduce your income tax rate. For instance, on your 2020 taxes, you may be able to deduct points that you paid when obtaining a home mortgage. This is because points are considered prepaid interest and are therefore deductible as such.
Although you may have numerous benefits available to you when purchasing and/or selling your primary residence, prior to deducting any expenses, it is recommended that you first consult with a tax professional.
If you’re considering a move in the near future, contact us and we will provide you with an approximate value of your current property, as well as a step-by-step marketing plan for finding potential buyers quickly. Plus, if you still haven’t found your new dream home, we’ll assist you with narrowing down the best candidates for your specific needs and budget.
Sources:
Topic No. 504 Home Mortgage Points. https://irs.gov/taxtopics/tc504#
5 Sweet Tax Deductions When Selling a Home: Did You Take Them All? https://realtor.com/advice/sell/tax-deductions-when-selling-a-home/
