When you sell your home, you want to maximize the profit that you get from the sale of the home. However, if you don’t understand how your taxes will be affected by the sale of your home can impact the amount that you make after the sale is finalized.
In this article, we are going to give you 5 tips about the tax on selling a house. Continue reading to find out what these 5 need-to-know tips are.
Tax On Selling A House
The amount of taxes that you pay on a home will increase or decrease depending on whether you’re selling your primary residence or secondary home. The primary residence exclusion is a loophole that is provided by the IRS. Still, there are some other tips that you may consider looking into.
1. Not All Gains Are Taxable
Some of the profits that you make when selling your home may be exempt from taxation. You must meet the requirements in place to exempt a maximum of $250,000 of your total profit.
The qualifications are:
- The home was your primary residence for at least 2 of 5 years
- The home wasn’t purchased through a like-kind exchange
- You claimed no exclusions for the sale of the home 2 years before the sale date
Following these qualifications will allow you to exempt a portion of your profits from being taxed.
2. All Sales Don’t Need To Be On The Tax return
Before the sale of the home, you can sign an affidavit claiming that you won’t make any gain that can be taxed from the sale. Once the form has been signed, the agent won’t be required to send a 1099-S form to the IRS.
3. A Loss Isn’t A Deductible
If you sell your house and fall into a loss after the sale, you can not use this as a deduction. When your house is sold at a loss, this is considered to be a personal loss and not one that exempts you from paying taxes on the sale.
4. You Have To Payback First-Time Buyer Credit
If you used the first-time homebuyer credit, then you are required to pay back that credit or a portion of that credit after you’ve sold your home. There are ways to be exempted from paying back this credit. However, you would need to check the guidelines to know if you are exempt from paying it back.
5. Only 1 Home Can Be Excluded From Income
If you own 2 homes, only 1 of your homes can be exempt from your taxable income. The gain that you get from selling your primary living residence is the only profit that can be exempt from taxation.
If you’re unsure of which home would be considered your primary residence think about where you receive your mail or where you do your bank as a way to decide.
When it comes to tax on selling a house, there is a lot to consider before the finalization of your sale. We hope that the information provided above will give you some of the knowledge that you need about paying taxes after selling your home.
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