Tax season is once again right around the corner. If you’ve been kicking around the idea of selling your house in El Paso, here are some tax tips to help when you sell. Please note, this article is intended for informational purposes only. If you have any specific questions at all, you should reach out to the IRS or a trusted tax professional.
Tip #1 – Not All Profits Are Eligible to Be Taxed in Texas
Some of the best news you will learn in this article is that a big portion of your profits can be excluded from taxes if certain conditions are satisfied. In most cases, you can exclude $250k from the sale of your house in El Paso from what you will have taxed. This is doubled to $500k if you are filing a joint tax return.
The condition that must be satisfied is that the property you are selling must be your primary residence. What’s more, you can only use this deduction of $250,000 once every two years. To have your home in El Paso qualify, you must have lived in the house in question for at least two of the past five years.
Tip #2 – Other Possible Tax Exclusions
If you cannot claim the deduction just explained, there are still other possible tax exclusions you can qualify for on the sale of your house in El Paso. Most of these exclusions have to do with the reason you are selling your house. If you are selling because you have had to change your job, because of a health issue, or because of other unforeseen circumstances, you will likely be able to write off a portion of your profits from the sale of your El Paso house.
Tip #3 – Understanding Capital Gains Taxes
If the house in El Paso you are selling is one that you have only owned for a short while or an investment property, there will likely be a capital gains tax to which the profits from the sales of your home will be subject. Ultimately, how much you may be taxed here will depend on how much income you make in a year. While people who have a low income will likely pay no capital gains tax, those in higher tax brackets may find themselves having to pay 20% or even more from the sale of their home in taxes.
Tip #4 – Reporting the Sale of Your El Paso House
If you receive a 1099-S form from the agent who closed the sale of your house in El Paso, you’ll need to report the sale. This 1099-S form will inform the IRS about the proceeds from the real estate transaction. To avoid having to do this, you will want to make sure that all profits you make from the sale of your El Paso house have been excluded from tax obligations. You will want to let your agent know this at the time of the sale. Once the form is issued, even if you owe nothing and all profits can be deducted, you’ll still need to complete the form to demonstrate this to the IRS.
Tip #5 – Don’t Overlook Your First-Time Homebuyer Credit
If you applied for and received a first-time homebuyer credit and then sell your home, you may have to pay back all or part of that credit. How much you may have to pay back depends on the specific dates you purchased and sold your house. In most cases, you must live in your home for at least 36 months before selling or the credit must be paid back. There are special rules to this credit, so if you have specific questions, you should ask a trusted tax professional or contact your IRS representative.
Tip #6 – Don’t Forget You Can Deduct Your Selling Costs
Any reasonable cost you incur while selling your El Paso home will be eligible for a deduction on your taxes. This means everything including improvements, assessments, agent fees, closing costs, and more can be deducted. You just need to make sure you track all of these costs so you can deduct them when it comes to tax time.
No matter when you decide to sell your home, you should always rely on the counsel of qualified, trusted professionals. Make sure to discuss things with your agent, tax specialist, accountant, or attorney to get specific answers for the sale of your property.
If you are looking to sell your house in El Paso quickly for cash, Level Cash Home Offers can help. Just send us a message or call our office at 915-228-3314 and talk to one of our agents today.