We have about a month left before the 2020 tax filing deadline. Currently, that is Wednesday, April 15th. However, in a recent address to the nation, President Trump announced that he would be allowing an extension for some “individuals and businesses negatively impacted” by COVID-19. Specifics about who qualifies for an extension and how long that extension will be are still forthcoming. Meanwhile, anyone who sold their Westfield home last year may be entitled to certain tax deductions and exemptions.
Westfield Home Seller Tax Deductions
Any costs associated with the actual sale of your home (legal fees, escrow fees, commissions, etc.) can be deducted from your taxes. These should all be included in your closing statement. However, you need to have used that Westfield home as your primary residence for at least two of the past five years.
Did you need to paint, replace window screens, fix broken windows or do anything else to make your Westfield home more marketable? Those costs could be tax deductible. However, these improvements/repairs must have taken place no later than 90 days from close of escrow. Otherwise, they are not deductible.
When you are a homeowner, you get to claim up any property taxes you paid as a deduction (up to $10,000). The same holds true for when you sell your house. Anything you paid up until the time of close may be deductible up to $10,000.
Just like property taxes, any mortgage interest you pay before closing may be deducted. Before December 15, 2017, homeowners could claim all mortgage interest paid up to $1 million of mortgage debt. After that, a new tax code went into effect that put a cap at $750,000 of mortgage debt. So, if you purchased a home or refinanced after that debt, you must adhere to the new tax code rules. Both property taxes and mortgage interest deductions must be itemized in order to claim them. So, to make them worth your while, the total should be more than your standard deduction. To determine whether or not to itemize, discuss this with your tax advisor, attorney or preparer.
Capital Gains Tax
When you sell your Westfield home, you are subject to a capital gains tax on your net profit. However, the first $250,000 (single) or $500,000 (married couples) of that profit is exempt from this tax. Again, you need to have utilized the property as your primary residence for at least two of the last five years to qualify for the entire exemption. If you sell it within two years of purchasing it, you might be entitled to a percentage of the total.