Home Seller Tax Secrets Revealed

Home Seller Tax Secrets Revealed

There’s something I’ve been meaning to talk to you about, and it’s serious.

I’ve noticed that a lot of our clients have been selling homes recently, and there’s something you should know.

Did you know that when you sell your home, the law is set up to protect home sellers from being taxed too much?

For example, when selling your primary residence, you should not pay tax unless you profited more than the threshold amount (this is a standard amount set by law; 250k for single and 500k for joint filers).

For example, if your house was $300k when you bought it, and you recently sold it for $650k, then you’ve made a profit of $350k.

Similarly to when you sell stock, you only have to pay tax on the profit.

However, the difference between selling stock and selling a home is that you only have to pay taxes on $100k of that money, because of the standard threshold amount.

But wait, there’s more!

On top of the purchase price, you also have to be aware that home improvements are included in the cost basis of the taxable income.

And finally when you do sell your home, if you received a 1099-S form (Not everyone gets one, but it’s a report of how much you sold the property for), you must make sure to include it on your return.

If you don’t, the IRS will send you a very unfortunate notice, attempting to tax you on the FULL SALE AMOUNT  without considering the basis.

If you don’t plan for these things now, you could potentially have a large tax liability, or an IRS letter on your hands that will take unnecessary time and money to resolve.

So to recap, all you have to do is properly produce your property price to the picky professionals at the IRS.

I hope that wasn’t too confusing! 

If you need any help with any of this stuff, contact us at now.