It’s almost that time of year… yes, tax season is almost upon us! If you are selling a house in Phoenix, you will love these tax tips for selling your home! This article is for informational purposes only but offers valuable tax tips for selling your Phoenix house!
For specific questions, contact a trusted tax professional, or the IRS!
Not All Profits Are Taxable
You can exclude a high portion of your profits if certain conditions are met. Typically, you can exclude $250,000 from your tax return and up to $500,000 if filing a joint return. (However, if you sell for a loss, you won’t be able to take a deduction for that amount.)
The deduction is only available when selling your primary residence and can only be used once every two years. To qualify for the deduction, you must have lived in the residence for at least two of the past five years.
It is essential that whenever you move, your address is updated with the IRS.
If you do not meet the requirements above, you might still be able to exclude a portion of your profits from your income tax. You can meet many special conditions to receive a prorated, tax-free gain. For example, if you need to sell because of a change in your health, a job change, or other unforeseen circumstances, you can write off a portion of the profit.
Reporting the Sale
You will need to report the sale if you receive a 1099-S form from the closing agent. This form provides the IRS with information on real estate transactions' proceeds. To avoid reporting, make sure that you can exclude all profits. Let the agent know at the closing time that the form will not need to be issued. Even if you can deduct all profits, if the form is issued, you will still need to file it with the IRS… even if no money is owed.
Capital Gains Taxes
If you are selling an investment property or house you have only owned briefly, you will likely be subject to the capital gains tax. You will pay no capital gains taxes if you have a lower income. People in higher tax brackets can pay upwards of 20%. Short-term assets are typically taxed the same as ordinary income.
First-Time Homebuyer Credit
Depending on the dates you bought and sold, you might have to pay back all or part of the credit you received. Typically if you move within 36 months of purchasing the home, the credit must be paid back upon the sale. Special rules apply and can be found in Publication 523 from the IRS.
Deduct Selling Costs
When selling your Phoenix house, you will be able to deduct any reasonable cost when selling your home. This includes the closing costs, improvements made to sell the house, assessments, marketing costs, agent fees, and so on. Keep track of every cent you spend to sell your home. Come tax time. This can amount to major deductions!
No matter what time of the year you sell, it is always important to seek the counsel of professionals. Consult your agent, accountant, and attorney to ensure you have set the best terms for yourself.
Don’t stress too much about taxes when putting your house up for sale in Phoenix. Odds are Uncle Sam won’t be getting his hands on your profits.
As always, reaching out to a tax professional can help you get tax tips for selling your Phoenix house. Taxes can be a little overwhelming, and ever-changing conditions are constantly moving into place. It's essential to be up to date with the latest tax news to help you make tax time a little less stressful.