Don’t Let Sellers Leave Tax Breaks on the Table
CHICAGO – Remind sellers to ask their financial advisers about tax deductions they’re eligible for in a home sale. One of the big ones they may qualify for: selling costs. As long as a cost is directly tied to the sale of a home, it qualifies for tax breaks.
Also, sellers who have lived in their home as their principal residence for at least two out of the five years prior to selling it can earn tax advantages. “You can deduct any costs associated with selling the home – including legal fees, escrow fees, advertising costs and real estate agent commissions,” says Joshua Zimmelman, president of Westwood Tax and Consulting in Rockville Center, N.Y.
But tax experts say these costs can’t be deducted in the same way as mortgage interest. They’re subtracted from the sales price of the home. That turns into a capital gains tax.
Other potential deductions for sellers are home improvement and repair costs. Sellers who performed renovations to make their home more marketable may be able to deduct those costs from their taxes too. Renovation projects could include painting the house or repairing the roof or water heater, for example.
“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,” Zimmelman says.
Source: “5 Sweet Tax Deductions When Selling a Home: Did You Take Them All?” realtor.com® (Feb. 24, 2020)
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