The deadline to file your taxes is exactly six weeks from today (April 15th). If you sold your real estate in Lake Havasu last year, you might be eligible for some pretty sweet tax deductions. So, before you file, read over the following home seller tax deductions. Keep this in mind: if you didn’t sell your property on the Havasu real estate market last year but plan on doing it this year, these deductions apply for next year’s tax filing, too.
Home Seller Tax Deductions
Home Selling Costs
Have you lived in your real estate in Lake Havasu for at least two of the last five years as your primary residence? Then, some of the costs associated with the sale of your Havasu home could be deductible. For example, legal fees, escrow fees, REALTOR® commissions, and even home staging costs can be deducted from your sale price. This helps reduce your capital gains tax.
Improvements & Repairs
Did you shell out money for improvements or repairs in order to get your property ready for the Havasu real estate market? What qualifies? Painting, replacing a water heater, making repairs to the roof, curb appeal updates, etc. The caveat? These improvements and/or repairs must have been completed within 90 days of closing on your real estate in Lake Havasu. Otherwise, no dice.
Prepaid Property Taxes
Responsible homeowners stay on top of things like home maintenance and property taxes. So, if you paid your taxes for the year on time, whatever you paid up until the your property sold can be tax deductible. However, the IRS puts a cap of $10,000 on this deduction. If you paid more than that, you won’t be able to deduct it all.
Just like property taxes, homeowners may deduct the mortgage interest paid up until the time their real estate in Lake Havasu was sold. If you purchased your property before December 25, 2017, the interest paid on up to $1 million of mortgage debt is deductible. However, the IRS put a cap of $750,000 in mortgage debt on any property bought on the Havasu real estate market after that. With the median sale price of a Havasu home hovering between $275,000 to $300,000 right now, more likely than not, you fall well below the $750,000 cap. So, all interest paid for the year up until you sold your property is tax deductible.
Capital Gains Tax Exception
Finally, let’s talk about the capital gains tax. When you sell your home, any money remaining after you pay off your mortgage debt and any costs associated with the sale of your real estate in Lake Havasu is considered profit, aka capital gains. The IRS considers this income. As such, it’s taxable. However, under the current tax code, homeowners receive a capital gains tax exemption on the first $250,000 (for single taxpayers) or $500,000 (for married filing jointly) of profit.
So, let’s say you owned your house outright and sold it for $300,000. You spent $25,000 in costs to sell your property. If you’re married, you wouldn’t owe anything on the $275,000 profit you receive from the sale. But, if you’re a single homeowner, you pay capital gains on only the amount over the $250,000 limit. In this case, $25,000. However, you must have lived in and used the property as your primary residence for at least two of the last five years to qualify.
If you lived in your real estate in Lake Havasu for less than two years, you may still be able to use the capital gains tax exemption but only for a percentage of the limit. And it’s based on the amount of time you lived on the property. Ask your tax advisor about how this works before you file.
Alexis Steel – 928-303-2199
Keller Williams Arizona Living Realty
Search homes at: www.TheHavasuHome.com