You need to learn about these tax deductions so you can start saving money.
Today I’m here to share a few tips about tax deductions that can help you when you’re selling a home. Many of these deductions are regular expenses associated with a sale, like commissions, escrow, title fees, inspections, and staging. Deductions on these things will help you put more money in your pocket, so I’m here to share some that a lot of people may not know about.
First, any repairs that you do within 90 days of the sale can be deducted. If it’s a bigger project, see if you can get it done within those three months before; otherwise, the IRS might not recognize it. Also, always check these things with your tax professional.
In addition, you can also deduct property taxes for the year in which you purchased the home. It is all prorated from the date you purchase to the date you close. However, one thing about this process has changed recently in California—you can only deduct up to $10,000 of property taxes. With today’s prices, many people pay more than that.
“These deductions will help you put more money in your pocket.”
Another thing you can deduct is the interest on your mortgage. However, laws for this changed when the property tax laws changed. Similar to my earlier point, you can only deduct up to $750,000 of your mortgage interest. However, if you bought your home before 2018 when these laws changed, you can still deduct up to $1 million.
The next thing I should mention is capital gains tax exclusion. If you’ve owned a home for more than two of the last five years and you’ve lived in it as your primary residence, you can write off $250,000 of capital gains tax if you’re single and $500,000 if you’re married. Prices have increased pretty rapidly recently, so some people may surpass that. Those people would have to pay the tax above those amounts. Just make sure to consult your tax professional.
One other thing you can deduct is your discount points. Many of today’s sellers are helping buyers combat higher interest rates with discount points, so know those can be written off. Lastly, if you are active-duty military personnel, you can write off your moving expenses.
If you have any questions about this or anything else related to real estate, feel free to reach out, as I am always here to help. You can call (562) 316-2915 or email me anytime. I look forward to hearing from you.