tax deductions Archives - Luxury Homes/Top Towns

Do you always find yourself scrambling at the last minute to file your taxes? You only have 17 days until this year’s April 18th filing deadline. But do not worry. This year, you might feel fortunate to have procrastinated. Why? Well, if you sold a Westfield area home last year, you still have time to claim these home seller tax deductions.

If you waited until the last minute to file your taxes for 2022 AND you sold a Westfield area home last year, it is not too late to claim these tax deductions.

Home Seller Tax Deductions

Costs Associated With the Actual Home Sale

Staging fees, escrow fees, agent commissions, etc. You paid somebody to spruce up your curb appeal. Maybe you performed a home inspection before you listed to avoid any unpleasant surprises during escrow. Any money you spent on these and anything else associated with the actual sale of your Westfield area home may be tax-deductible.

Improvements/Repairs

Perhaps your property needed some updating to compete with other properties on the market. Maybe you needed to add a fresh coat of paint to appeal to a wider market. You finally oiled those squeaky hinges and repaired the holes in the wall before you listed your home for sale. As long as these were done within 90 days of your closing date (not your listing date), you can claim these expenses on your taxes.

Property Taxes

You always pay your property taxes on time. In fact, many times, you paid them well in advance. Fortunately for you, you may deduct up to $10,000 of the property taxes paid during the year you sold your home.

Interest On Your Mortgage

Another one of the tax deductions home sellers get to claim is their mortgage interest. The mortgage interest you paid for the year up until the time you sold your home can be deducted from your taxes. There are limits to the amount of interest you can deduct, though. Your tax preparer will be to tell you what they are before you file.

Capital Gains Exemption

Finally, let’s talk about capital gains. The difference between what you paid for a property and what you sold it for is called capital gains (provided you sell it for more than you paid for it). The IRS considers this income. Therefore, they apply a tax to it. However, the first $250,000 of capital gains for individuals and $500,000 for married couples are exempt from the capital gains tax. So, if you and your spouse bought your Westfield home for $250,000 and sold it for $550,000, you do not owe any capital gains. If you were the sole owner under the same scenario, you only pay capital gains on $50,000. The first $250,000 is exempt. Also, keep in mind that many of your selling expenses chip away at your capital gains. In turn, this lowers the amount subject to a capital gains tax.

I do not profess to be an expert on taxes in any way. Always talk to your tax preparer about any possible tax deductions before you file. The IRS also provides a guide on tax deductions for selling your home if you need any further help.

Scott Gleason, CRS at Coldwell Banker Realty – East, NJ Luxury Homes

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.

If you sold your Westfield home last year, you could be entitled to a few tax deductions and an exemption when you file your taxes this year.

Westfield Home Seller Tax Deductions

Selling Costs

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.

Home Improvements/Repairs

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.

Property Taxes

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.

Mortgage Interest

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.

Scott Gleason, CRS at Coldwell Banker Realty – East, NJ Luxury Homes