- ORIGINAL NEWS
More home sellers are paying capital gains taxes — here’s how to reduce your bill
- SUMMARY
Due to skyrocketing property values, an increasing number of Americans are subject to capital gains taxes when selling their homes.
In 2023, nearly 8% of home sales exceeded $500,000 in profit, a significant increase from 3% in 2019.
However, homeowners can take advantage of special tax breaks.
Married couples can exempt up to $500,000 in profits from capital gains taxes, while individuals can exempt up to $250,000.
These thresholds haven’t been adjusted for inflation since 1997, leading to more individuals being affected by capital gains taxes.
To qualify for the exemption, homeowners must meet certain criteria.
They must have lived in the home as their primary residence for at least two years out of the past five and owned it for at least two of those five years.
If your home sale profit exceeds the exemption limit, you can reduce your tax liability by adding to the “basis” of your home.
This refers to the original purchase price and any capital improvements made since.
Improvements that can increase your home’s basis include major renovations, additions, and new roofs.
However, routine maintenance and repairs do not qualify.
By increasing the basis, you effectively reduce the amount of profit subject to capital gains taxes.
To avoid potential complications, it’s essential to keep documentation of any improvements made to your home.
If you sell your property, the IRS will receive a Form 1099-S showing the closing date and gross proceeds.
Having documentation will be crucial in case of an IRS audit.
- NEWS SENTIMENT CHECK
- Overall sentiment:
positive
Positive
“Married couples can shield up to $500,000 in home sale profits from capital gains, and single filers can exempt up to $250,000.”
“It’s key for a special tax break for homeowners who make a profit when selling a primary residence.”
Negative
“More Americans are paying capital gains taxes on home sale profits amid soaring property values — but there are ways to reduce your bill, experts say.”
“Those capital gains exemption thresholds haven’t been indexed for inflation since 1997, said certified financial planner Jaime Quinones with Stockade Wealth Management in Marlboro, New Jersey.”