Blog posted On February 24, 2022
Tax season may not be your favorite time of year, but it does come with some perks. If you currently own a home or recently sold your home, you probably qualify for some decent tax deductions this year.
Many people know that you can deduct things like mortgage interest from your annual income taxes if you own a home. But you can also deduct several costs from your taxes if you recently sold your home.
Home sellers can often deduct selling costs from their annual income taxes as long as:
Examples of eligible costs include:
It’s also important to remember that these costs are deducted differently than mortgage interest. To deduct selling costs from your taxes, you subtract them from the sales prices of your home, which positively affects your capital gains tax.
If you upgraded any features or made any renovations in your home to list it at a better price and sell it quicker, then you can deduct those costs as well. Examples of these repairs include:
There is a catch to these deductions. To be eligible for home improvement deductions, they have to be made within 90 days of closing on your home sale.
You can deduct your property taxes up until you sell your home. So whatever you paid in property taxes last year, you can deduct. The property tax deduction is capped at $10,000.
You can still deduct mortgage interest from your taxes for the amount of the year you still owned your home.
Capital gains are your profits from selling your home. Unfortunately, they are taxed as income. But you can exclude up to $250,000 of capital gains from the sale (if you are single—$500,000 if you are married). Again, to qualify for this exclusion, you must have lived in the home for two of the past five years.
Tax season isn’t always easy. But we’re here to help you through it in any way we can. If you have any questions about what deductions you could qualify for, or if you need any documents from us, don’t hesitate to reach out. To see which tax documents you should be on the lookout for, check out our blog.