The IRS offers different tax deductions and exceptions for people who meet certain conditions. And it has deductions for real estate sellers as well. This is what sellers of homes for sale in Clarkston, Michigan have been enjoying from the deals they close.
Of course, you want to take advantage of these as well. After all, the overall amount of these deductions can remove many worries after you spend big in selling a home. That is why you must know about these before putting your Clarkston property on the market.
Enjoy these Tax Deductions when Selling Homes for Sale in Clarkston
Most of these tax deductions are only applicable for primary residences. Meaning, it don’t cover vacation homes, rentals you own and other secondary properties. Also, you must live for at least 2 years in it, out of at least 5 years before selling. Consult your real estate agent or a tax expert for better guidance about requirements.
Now, here are the tax deductibles sellers of houses for sale in Clarkston MI should know:
1. Overall Cost of Selling
The 2 out of 5-year living requirement before selling is applicable here. This deductible circles on the amount you spend in selling a home. Think of real estate agent commission, legal fees, advertising fees, escrow fees and home staging fees among other expenses.
But it doesn’t directly subtract from the tax you ought to pay. Instead, subtract it from your home’s sale price. This is helpful for capital gains tax deduction, which is another big deductible you should know.
2. Capital Gains Tax
When homes for sale in Clarkston are sold, sellers enjoy the cash they earn as profit. But such capital gains are technically taxable, so sellers worry of slashing an amount off their sweet earnings. Thing is, you can actually exclude up to $250,000 capital gains from being taxed. This is $500,000 if you’re married, and is paying a joint tax.
Yes, this is technically an exclusion, but it is still a sort of deduction from the taxes you ought to shoulder.
3. Mortgage Loan Interest and Property Tax
These are itemized deductions which can slash an amount off your tax. You can deduct up to a maximum of $10,000 worth of property taxes if you pay them regularly. Whereas mortgage interest has $1 million cap for owners who have bought their home before December 15, 2017. The latter has a new cap amount of $750,000 for new homeowners.
Also, remember that all your itemized deductions should be greater than the new standard following the Tax Cut and Job Act. There’s $12,200 for singles, $18,350 if you’re the head of your household, and $24,400 for married couples in joint tax.
4. Home Improvements
When you’ve done some home improvements within 90 days before closing, the total amount is also tax deductible. But these improvements should boost the condition, value and function of the property. Think of adding a bedroom, replacing a non-functioning air conditioning unit or adding energy efficient features.
Repairs and renovations that doesn’t give value, improve condition and boost functionality cannot be accepted as deductible. You can’t even include simple repaint job for it.
You’ve already learned the essential tax deductibles sellers of homes for sale in Clarkston should enjoy. These would save you a lot of headaches during the filing season, as long as you’d use them right. Talk with your real estate agent or a tax professional for more details.
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