Lexington, KY: Tax season is right around the corner. Taxes may not be considered a fun topic. But these tax tips for selling your Kentucky home could make a positive impact in your family finances. And having more money for your family is always in season!
Remember: These tips are for informational purposes only. If you have specific questions, then contact your trusted tax professional, or the IRS!
Tax Tips For Selling – Not All Profits Are Taxable
A large amount of your profits from selling your house may not taxable if you meet certain conditions. You can exclude up to $250,000 from your tax return. If you’re filing a joint return, that amount is raised to $500,000.
Those exclusions are only for profits. If you sell for a loss, you probably won’t be able to deduct the amount of the loss.
This profit exclusion is specifically for your primary residence. So rental properties will not qualify for this tax tip. Also, you can only use this once every two years. Plus, you’ll have to have lived in this residence for 2 of the last 5 years.
Tax Tips For Selling – Update Your Address
Whenever you move from one place to another, you tell your friends and family. You should also inform the IRS. It lets them know where you reside now. So when they send you personal correspondence, no one else but you will receive it. This will protect your privacy and give the IRS proof of your residence.
Unforeseen Circumstances And More Exclusions
What if you don’t meet the exact requirements of selling your primary residence? Well…you still may be allowed to exclude some of the profits. Of course, you’ll have to meet certain specific conditions to receive a prorated tax free gain. You may be able to write off a portion of your profits if you must sell your home because of a job change, a change in health, or other unforeseen circumstances.
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 of the home. You can find more information about the special rules for first time home buyer credit in IRS Publication 523.
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 regarding the proceeds from real estate transactions. To avoid reporting, make sure that you are able to exclude all profits. Let the agent know at the time of closing that the form will not need to be issued. Even if you are able to 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. Capital Gains taxes are dependent on how much you make. If you have a lower income, you will pay no capital gains taxes. People in higher tax brackets can pay upwards of 20%. Short-term assets are typically taxed the same as ordinary income.
Deduct Selling Costs
When selling your Kentucky residence, you may be able to deduct any reasonable cost of selling. This includes the closing costs, assessments, improvements made in order to sell the house, marketing costs, agent fees and other costs of selling. So track every dollar you have to spend to sell your home because it can add up to a big deduction.
If you do not have the cash or the savings it will take to get your house ready to sell, then call us. We may be able to help. We are a professional house buying company. We purchase houses in any condition. So you don’t have to wait to sell your house. You could sell you house this week!
Whatever time of year you choose to sell, you should always seek the counsel of professionals. You should talk to your agent, lawyer, and accountant to make sure you have the best terms for yourself.
Don’t let thinking about taxes increase your stress when thinking of selling your Lexington home. Uncle Sam probably won’t get his hands on your profits.
We hope these tax tips for selling helps you and your family.