Life Events

Selling a home involves more than finding a buyer. Taxes, timing and preparation can all affect how much you actually keep. These are the questions sellers ask us most.

Do I owe tax when I sell my home?

Not necessarily. Federal law allows many homeowners to exclude a portion of the gain on the sale of a main home, provided they meet ownership and use tests, generally having owned and lived in the home for a minimum period during the years before the sale. The exclusion amount and the details are set by the IRS, so check current rules or ask us before you list.

How do I figure out my gain?

Your gain is generally the selling price minus selling expenses minus your adjusted basis. Basis starts with what you paid, plus certain closing costs and the cost of permanent improvements such as an addition or a new roof. Routine repairs usually do not count. Keep records of every improvement for as long as you own the home.

What if I lived in the home for only a short time?

If you do not meet the usual tests, you may still qualify for a reduced exclusion when the sale is due to a change in employment, health or other unforeseen circumstances. These situations depend on the facts, so get advice before you assume the answer.

Can I deduct a loss on my home?

A loss on the sale of a personal residence is generally not deductible. Different rules apply to rental property or a home used for business.

What costs reduce my proceeds?

Expect real estate commissions, title and closing fees, transfer-related charges and any repairs or concessions negotiated with the buyer. Some selling costs reduce your taxable gain, which is why keeping the closing statement is important.

What should I do with the proceeds?

Before the sale closes, think about paying off the existing mortgage, funding your next purchase, setting aside money for any tax due and keeping an emergency reserve. If you will owe tax on a large gain, planning ahead for estimated payments can help prevent penalties.

Planning to sell? Get in touch and we will help you estimate the tax result before you accept an offer.