Don’t Leave Tax Breaks on the Table
Don’t Leave Tax Breaks on the Table
Remind your sellers to ask their financial advisers about the tax deductions they’re eligible for in a home sale. One of the big ones they may qualify for: selling costs.
As long as the costs are directly tied to the sale of the home, they qualify for tax breaks. Also, sellers who have lived in their home as their principal residence for at least two out of the five years prior to selling it can earn tax advantages. “You can deduct any costs associated with selling the home—including legal fees, escrow fees, advertising costs, and real estate agent commissions,” says Joshua Zimmelman, president of Westwood Tax and Consulting in Rockville Center, N.Y.
But tax experts warn that these costs can’t be deducted like mortgage interest. They are subtracted from the sales price of the home. That turns into a capital gains tax.
Other potential deductions for sellers are home improvement and repair costs. Sellers who made renovations to make their home more marketable may be able to deduct those costs from their taxes. Renovation projects could include painting the house or repairing the roof or water heater, for example. “If you needed to make home improvements in order to sell your home, you can deduct those expenses as selling costs, as long as they were made within 90 days of the closing,” Zimmelman says.
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