Are there any tax deductions available to homeowners who are selling their home? The short answer is no, and in fact, you might have to pay taxes on capital gains if you profit from the sale. But the longer answer is you may be able to get a few deductions, just not directly from the sale of the home. Learn more in our blog about tax deductions when you sell your home.
Can I Claim Tax Deductions When I Sell My Home?
When you sell your home, you’re turning a physical asset into cash, which is not a tax deductible event. But this doesn’t mean that there aren’t some tax deductions that may be available to you. Essentially this means that while you won’t be able to deduct closing costs, etc., you may be able to deduct things like your moving expenses, or discount points on your mortgage. As always, consult with your tax adviser concerning your individual situation.
Are you selling your home so you can move to a new home for a new job? If so, you might be able to deduct your moving expenses, which include:
- Travel expenses
- Mileage you drive related to the move
- Moving supplies
- Moving company expenses
Your new home needs to be at least 5 miles closer to your new job than your old home was in order to qualify for this deduction. One of the nice things about this deduction is that you actually claim it as an income adjustment as opposed to an itemized deduction. This means your adjusted gross income is reduced.
Mortgage Discount Points
Let’s say you refinanced your mortgage and paid point in cash to buy down the interest rate. You already know that you can deduct a proportion of these points every year until you pay off the loan. If you pay off your mortgage when you sell your home, you can deduct all of the points you haven’t deducted yet at once.
Cost Basis Calculations
Profit on the sale of a house is not calculated as the sale price minus the purchase price. It’s calculated using cost basis, and as a result, the amount of profit that may be subject to tax is reduced as well.
Cost basis is the what you originally paid for the property (including closing costs) plus the cost of any improvements you made. From this you subtract the net sale price, which is the sale price of the home minus closing costs, real estate agent commissions, and any other costs.
Real Estate Closing Services from Colony Title Associates
Colony Title has been in business since 1995 and handles more than 2,000 real estate closings per year. If you have any questions or would like to speak to a representative about closing, please give us a call at 410-884-1160 or visit our website for more information.