I just bought a home 3 months ago, can I pay it off now and not pay a bunch in taxes?

Forum|Forum|1 year ago
August 29, 2024
3 replies
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I sold my old home after I bo8ught the new one, the money I made will allow me to pay if off.

TurboTax Deluxe Online

Best answer by Mike9241

Using the sales proceeds from the old home to pay off the mortgage on your new home will not save you any taxes on the taxable portion of the gain from the sale. all that will happen is your mortgage interest deduction would be reduced.

If your home acquisition indebtedness exceeds the maximum paying down the mortgage will result in less interest that is not deductible.

There is not enough info to provide more advice. This forum is not for providing financial advice outside of income taxes. A financial advisor that can look at your whole financial picture would be able to offer the best advice. There are factors besides saving taxes.

VolvoGirl

Employee

That might not make a difference in your taxes. You will just have less mortgage interest that you can deduct if you itemized deductions. But most people don't have enough itemized deductions and take the Standard Deduction. You will still have property taxes you can deduct if you itemize.

edward-barrAuthor

Thank you! I thought that was the case but wanted to be sure. Thank you for the help!

fanfare

Employee

Figure the capital gains tax you will have to pay on your home sale before you use that to pay down your mortgage.

@edward-barr

xmasbaby0

Employee

@edward-barr You have not provided any information here regarding the sale of the "old" home except to tell us that you sold it. We do not know if you are subject to capital gains tax on that sale, since we do not know how long you lived in that home or what your filing status will be.

SALE OF HOUSE

If your gain was more than $250,000 filing Single, or more than $500,000 filing Married Filing Jointly the sale must be reported on your tax return. Whether you re-invested the gain in to another house is irrelevant. If you have a Form 1099-S go to Federal>Wages and Income>Less Common Income>Sale of Home (gain or loss)

If you owned and lived in the home as your primary residence for at least 2 of the last 5 years on the date of the sale, you do not have to report the home sale if the gain is less than $250K filing Single, or less than $500K filing Married Filing Jointly (and you both owned and lived in the home for at least 2 years).

If you are using online TT, you need Premium software to report the 1099-S

NOTE: If you have ever used the home as rental property or claimed a home office, you have more information to enter

Paying off the mortgage on the "new" home will not be a taxable event.

**Disclaimer: Every effort has been made to offer the most correct information possible. The poster disclaims any legal responsibility for the accuracy of the information that is contained in this post.**

Mike9241Answer

If your home acquisition indebtedness exceeds the maximum paying down the mortgage will result in less interest that is not deductible.