With the sale of a home often comes a profit, and the IRS requiring their piece of it. While you may not be eligible to take advantage of all the tax deductions available when selling your home, there are some steps you can take to increase your return. REILLY, REALTORS® is here to help make the home selling process as smooth as possible, and our Austin REALTORS® can answer any questions you might have along the way and help you achieve your goals.
Here are 5 tax deductions you can (and should!) use to your advantage:
1. Home improvements/repairs. If your home needs serious changes in order to sell, you can deduct those costs! The IRS requires repairs (like fixing a leaky roof, removing mold, replacing a smoke detector) to be completed within 90 days of the closing date in order to be deducted, and they can be deducted immediately in the tax year of the sale of your home. Improvements, on the other hand, are deducted over the course of several years based on an appreciation schedule.
2. Mortgage interest. If you are itemizing deductions and the total will exceed the standard deduction, you should claim your mortgage interest on your taxes. You can only deduct it from your primary residence, and up to $1 million may be deducted (or up to $750,000 if you purchased the home after the 2018 tax reform).
3. Discount points. Discount points are one-time costs paid up-front at closing to secure a lower mortgage rate. These discount points can be tax deductible in that the IRS counts them as prepaid mortgage interest. So, if you are itemizing and deducting your mortgage interest, you will also want to include any discount points that you purchased when buying your home. If you have refinanced your home loan, the deduction is spread out every year until it is paid off.
4. Property taxes. This is one of the easiest deductions to make as a homeowner! Up to $10,000 in property taxes can be deducted even after you sell, as long as they were paid in the year that you owned your home.
5. Costs related to selling your home. Be sure to keep close track of your expenses when it comes time to make the sale. Things like the cost to hire an agent, staging your home, and having it pre-inspected are all acceptable as deductions.
Looking to sell a home in Austin, TX? Contact us today for information and expert advice about Austin real estate.