Since this spring for a majority of the United States has been riddled with disappointing snow showers and unexpected cold fronts, we need to rely on something else to celebrate the end of a chilly winter. Luckily, 2018 tax returns can act as a fill in for sunshine and warm days, especially if you’re one of the many people who sold their home in 2017. While it may seem obvious that since the median cost of a home in the United States is around $200,000, then the steps to selling a house include paying some hefty taxes to the IRS after closing.
We at Hours to Dollars are happy to say that this isn’t the case at all and that several exemptions and tax write offs for sellers exist that can help maximize your tax return!
A huge exemption for people who sold their homes last year
Like we mentioned before, it’s easy to assume that just because homes are worth a lot of money, you have to pay taxes on the sale. While that can be the case for pricier home sales, it isn’t for a good portion of them. For individuals filing as single, you don’t have to pay taxes on the first $250,000 of the sale. For people filing jointly, then you don’t have to pay taxes on the first $500,000 of the sale. There are a few caveats:
- You need to have lived in the property for two or more years: In order to qualify for this exemption, you need to have lived in the property for at least two years before you sold it.
- You can’t have used this exemption in the last two years: If you sold another home within the previous two years and used this exemption, then you can’t use it again.
Don’t meet either of these qualifications? Don’t “write off” this exemption just yet. If you have a qualifying reason for not living in the home for over two years, then you may be eligible for a reduced exclusion. A reduced exclusion entails not having to pay taxes on a portion of the first $250,000 ($500,000 if filing jointly), of the sale. If you had to sell the home because you contracted a severe illness, lost employment, were deployed, or had a divorce, then you may be qualified.
Given that over 5.51 million homes were sold in the United States in 2017, a huge portion of people are eligible for this rather substantial exemption. If you’re unsure of whether or not you’re qualified, be sure to talk with a tax consultant or financial advisor who can help you understand your financial situation as well as make recommendations for other write offs that can be tied to a home sale including:
- Real estate agent commission
- Home improvement
Taxes can be tricky, so it’s best to look towards the experts to make sure that all of your write offs are valid and that you won’t run into snags along the way.
As always, be sure to tune into our posts regularly to find tips and tricks meant to help you turn your skills into something profitable!
Author-Bio: I’m Julia Aldrich, HomeLight freelance writer and Real Estate blogger.