Tax Tips For Selling Your Houston Home

At this point, we can safely assume that the tax season is afoot. Yes! It’s almost that time of the year. So if you’re about to trade in the Houston real estate market, you’ll have to use these tax tips for selling your  Houston home. The primary intention of this piece is to provide information and nothing else. In case you need more insights, contact the IRS or a trusted tax expert.

Not all profits out there are taxable

As a trader, you can exclude a significant portion of your earnings as long as you make sure particular conditions are met in the process. Traditionally, you could eliminate approximately 250,000 dollars from your tax return, and up to 500,000 dollars in the case of an individual filing for a joint return. But if you sell the property at a loss, you can’t take a deduction for that amount.

The deduction will only be available if you’re putting your primary residence up for sale. You should also know that it can just be used once in every two years. Only an individual who has taken residence on the property for two of the past five years can qualify for the deduction. That’s why it’s always critical for the IRS to update your address whenever you decide to relocate.

Other significant exclusions

Anyone who doesn’t meet the above requirements still has the chance to exclude a fraction of their profits from their income tax. However, if you want to get a prorated, tax-free gain, you have to meet some unique conditions. For instance, people who decide to sell due to health complications, unforeseen circumstances, or job change, can write-off a fraction of the profit.

Reporting the sale

Immediately you receive a 1009-s form from the closing realtor you have to record the sale. Through this form, the IRS gets information on the proceeds acquired from the real estate transactions. Excluding all profits might help you avoid making the report. Make sure you let your agent knows that while closing, they don’t have to issue the form because you won’t need it. Remember, even if you’re successful in deducting all profits once the form gets issued you have to file it with the IRS.

Capital Gains Taxes

The Capital Gain Tax gets paid by that individual who has decided to sell a house or investment property they have briefly owned. The amount you spend as Capital Gain Tax hinges on what you make. A low-income earner will pay almost nothing while a high-income earner can handle more than twenty percent of their earnings. It’s also crucial to note that short-term assets are traditionally taxed the very same way they do ordinary income.

First-time homebuyer credit

If you fall in this bracket of homeowners, you have to pay back the amount you received either in full or part of it. Take the case of an individual who moved after three years of purchasing the property. That credit has to be paid upon the sale. But there are special rules for different situations, and you may find them in Publication 523 from the IRS.

Always keep track of every penny you spend when trying to sell your home. When calculating how much tax you have to pay, that amount will account for a significant deduction.

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