Sale of home

@Rose2bud7 Thanks for the question!!

You won't pay taxes on the first $250,000 (also known as a gain) you make from the sale of your home (or the first $500,000 if you're Married Filing Jointly).

That income is free and clear as long as:

• You owned the home
• It was your main home for two years or more within the five years leading up to the sale
• You waited at least two years between selling your primary home and excluding your first $250,000 or $500,000 from taxes. In other words, you may buy and sell as many primary homes as you'd like, but you'll only get this tax benefit every two years.

Even though you sold your home, if you choose to itemize your deductions, you can deduct many real estate expenses like mortgage interest, insurance, points, property tax, and improvements. You can even deduct the interest and taxes charged at closing. Selling costs like real estate broker's commissions and title insurance are also deductible. 

How does selling a home affect my taxes? 

Hi @Rose2bud7  Thank you for joining us today!

If you sold or are considering selling your primary home you may be eligible to exclude $250,000 for single filers (or $500,000 for married filing joint filers) on the gain on the sale of your home.  You can generally qualify for this exclusion  if you owned and lived in the home for a total of two of the five years before the sale.

To properly report the sale of your primary residence gather the following documents:

• Closing statement when you purchased the home;
• Closing statement when you sold the home in 2023;
• 2023 Form 1099S (you may receive this from the Title Company -- but the same information should be on the 2023 closing statement);
• Receipts from major purchases/upgrades to the home such as a home addition, new roof, upgraded kitchen, etc.;
• Documentation of any casualty losses or tax credits during the time that you owned the home.

Using your documentation you can then determine the adjusted basis of the home starting with the home purchase price, plus the expenses to purchase the home and any major home improvements.  You will also need to reduce this amount by any losses or tax credits.

The sales price of the home is reduced by the selling costs, such as realtor fees, title fees, etc. to sell the home typically listed on closing agreement.  Many of these expenses can be substantial.

The adjusted sales price less the adjusted basis of the home will give you your overall gain.  

TurboTax is great at guiding you through these questions and helping you to capture all of the related costs and expenses.  Here is a link for additional information on items to consider

Selling Your Home 

Thank you!

Melanie, CPA