Home Seller Tax Deductions
By www-thehavasuhome-com February 28, 2019

When you buy real estate in Lake Havasu, you get to enjoy some very nice tax breaks (mortgage interest, PMI, property taxes, home office, etc). But did you know that when you sell your home on the Havasu real estate market, you’re also eligible for certain tax breaks? If you sold your home in 2018, there are some home seller tax deductions you might be happy to hear about when filing your taxes this year. However, with the new tax code that went into effect late last year (Tax Cuts and Jobs Act), there have been some changes that you should be aware of as well.

Home Seller Tax Deductions

Mortgage Interest Deduction & Property Taxes

First up, you still get to deduct the mortgage interest and property taxes you paid up until the final sale of your real estate in Lake Havasu. For mortgages acquired before December 31, 2017, the homeowner could deduct the interest paid on up to a $1,000,000 mortgage loan. However, as of January 1, 2018, the new tax code lowered that ceiling to a $750,000 loan. That shouldn’t affect most homeowners in the Havasu real estate market. As for property taxes, you also get to deduct any current annual taxes paid for before you sold your Havasu home up to $10,000. Before the new tax code went into effect, there was no limit. Keep in mind that you must itemize in order to utilize these deductions. The new tax code raised the standard deduction for single filers to $12,200 and increased to $24,400 for married couples filing jointly. So, depending on your situation, itemizing might not be the best course of action. Talk to your tax preparer about your options before filing.

Home Improvements/Repairs

Did you make improvements or complete repairs in order to make your home more marketable to buyers? For example, did you paint the house, add an extra room/bathroom, replace an old water heater or upgrade the plumbing? Those expenses might be eligible as another one of the home seller tax deductions owners of real estate in Lake Havasu can claim. But there are specific limitations. Only repairs/improvements made no earlier than 90 days before your closing date can be deducted. If they were done 91 days or further out from closing, you cannot include them as part of your seller costs.

Seller Costs

What constitutes “seller costs”? Anything that you spent to sell your home on the Havasu real estate market. For example, the commission you paid your real estate agent can be deducted. Anything you paid to advertise your home to potential buyers, including home staging fees or even professional photographer fees (if you hired a pro to take photos for your listing). Escrow fees and legal fees can also be deducted. However, the real estate in Lake Havasu that you sell must be your principal residence (no investment/rental properties) and you need to have lived in the home for at least two of the previous five years before the date of sale. Although, unlike the mortgage interest deduction, these costs come directly off the sales price and not your taxes due. This helps reduce your capital gains tax.

Capital Gains Tax

Any profit you receive from the sale of your  real estate in Lake Havasu is considered capital gains. That’s whatever’s left over after the balance of your mortgage is paid off (if anything), real estate commissions, expenses, etc. What is left is considered “income” as far as the IRS is considered. Therefore, it’s subject to capital gains tax. But, you can exclude up to $250,000 (for individuals) or $500,000 (for married couples) of your capital gains from being taxed. True, this isn’t technically a tax “deduction”, but it still saves you from having to pay taxes on that portion of your profit. Again, you must have used this property as your primary residence for at least two of the past five years in order to qualify for the exclusion. Originally, lawmakers battled back and forth about whether to stop this exclusion. Luckily, they ultimately decided to keep it on the books…for now. That may change in the future.
If you have a question about any of these home seller tax deductions, talk to your tax advisor, preparer or lawyer before filing. They should be on top of the current tax code. Remember, the filing deadline for this year is April 15, 2019. It’ll be here before you know it!

Alexis Steel – 928-303-2199
Keller Williams Arizona Living Realty
Search homes at www.TheHavasuHome.com 

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