It’s hard to believe, but it’s springtime and we’re once again in the midst of tax season! If you’re selling a house in Omaha or anywhere else, these tax tips may be helpful to remember. Please keep in mind, this article is for informational purposes only.
*For specific questions, contact a trusted tax professional, or the IRS!
Not All Profits are Taxable
You should be able to exclude a high portion of your home sale profit as long as certain conditions are met. Typically, you’ll be able to exclude $250,000 from your tax return, and up to $500,000 if filing a joint return. (However, if you sell for a loss, you won’t be able to take a deduction for that amount.)
The deduction is only available when selling your primary residence, and can only be used once every two years. To qualify for the deduction, you must have lived in the residence for at least two of the past five years.
Also, It’s important that you update your address with the IRS whenever you move.
If you don’t meet the requirements above, you may still be able to exclude a portion of your profits from your income tax. There are many special conditions you can meet in order to receive a prorated, tax-free gain. If you need to sell because of a change in your health, a job change or other unforeseen circumstances, you’ll be able to write off a portion of the profit. Visit with your CPA about this.
Reporting the Sale
You will need to report the sale if you receive a 1099-S form from the closing agent or title company. This form tells the IRS information about real estate transactions. To avoid reporting, make sure that you are able to exclude all profits. Let the agent know at the time of closing that the form will not need to be issued. Even if you are able to deduct all profits, if the form is issued, you will still need to file it with the IRS… even if no money is owed.
Capital Gains Taxes
If you’re selling an investment property or house you have only owned briefly, you probably be subject to the capital gains tax. Capital Gains taxes are dependent on how much you make. If you have a lower income, you’ll likely pay no capital gains taxes. People in higher tax brackets can pay upwards of 20% (this tax rate changes regularly). Short-term assets are typically taxed the same as ordinary income.
First-Time Homebuyer Credit
Did you receive a FIrst-Time Homebuyer credit? Depending on when you bought and sold the home, you might have to pay back all or part of the credit you received. Typically if you move within 36 months of purchasing the home, the credit must be paid back if the home is sold. Special rules apply and can be found in Publication 523 from the IRS. If you are considering your first home purchase or know someone who is, you’ll find the book, First-Time Home Buyer helpful.
Deduct Selling Costs
When selling your Omaha house, you will be able to deduct any reasonable costs when selling the home. This includes closing costs, improvements made in order to sell the house, assessments, marketing costs, agent fees, and so on. Keep track of every cent you spend in an effort to sell your home — and receipts for any improvements you made. Come tax time, this can amount to major deductions!
No matter what time of the year you sell, it is always important to seek the counsel of professionals. Consult your real estate agent, accountant, and attorney to make sure you have set up the best terms for yourself.