Right now, thousands of Americans are shifting through expenses, forms, and statements in a rush to make sure that their federal and state tax returns are filed.
If you’re in that boat, you’re likely wondering about what else can count as a write off in order to maximize your return.
If you’ve decided (and managed) to sell your home last year, then we have good news for you.
Property sales come with quite the variety of tax write offs and, as long as you have a general idea of gauging your qualifications, you could find yourself with some extra money.
Here are some tax write offs for sellers and tips on how to assess whether you can use them.
You’ve lived in the home you’ve sold for two or more years
If you lived in the home that you sold for over two years, then you are likely qualified for a tax break on the profits. There is a caveat, though. If you’re filing as single, then you don’t have to pay taxes on the first $250,00 of the sale and, if jointly, the first $500,000.
An additional limitation is that you can no have used this exclusion on a different home sale within the past two years. This write off is ideal for people who have recently sold their home that they’ve been living in and using for well over two years.
Additionally, with housing prices rising, especially in big cities, and the GOP Tax Plan pushing to cap the mortgage interest deduction, it may be smart to sell your home within the next year to both save money on mortgage interest, gain money on the sale and then not have to pay taxes on a portion of the profit.
You qualify for a reduced exclusion
Not everyone has the opportunity to live in their home for over two years, but that doesn’t always count as an exclusion.
In order to qualify for a reduced exclusion, you need to meet a certain criteria which can include a change in employment, health issues, and divorce. Basically, you need to prove that there were unforeseen circumstances that inhibited you from being able to live in the house.
The amount that you would receive on a reduced exclusion is generally proportional to the amount of time that you lived in the house. For instance, if you lived in it for only one year, then you’d be able to exclude half of the initial $250,000 or $500,000 (if filing jointly), not the entire profit.
Taxes can be confusing, especially when it comes to figuring out what you’re qualified for in terms of write offs and exclusions. If you’re not comfortable with filing your taxes on your own, we suggest hiring a professional or using a tax software.
Something we can’t stress enough is to study up on finances and know how your situation can benefit you. Here on the Money Journey Today blog we have a lot of great resources that can help you regardless of if it’s tax season or not.