- ORIGINAL NEWS
Your home sale may leave you in a tax shock. Here’s how to reduce your capital gains tax bill
- SUMMARY
In 2023, many homeowners who sold their properties made a profit, and that profit could potentially be subject to capital gains taxes.
However, single homeowners can shield up to $250,000 of their profits, and married couples filing jointly can protect up to $500,000 from taxation, provided they meet specific IRS criteria.
To qualify for the exclusion, homeowners must own and use the property as their primary residence for at least two of the past five years.
If certain life circumstances force you to sell, like job relocation or health issues, you may still qualify for a partial exclusion.
If your profit exceeds the exclusion limits, you can reduce your taxable gain by adding certain improvements made to the property that prolong its lifespan to your home’s original purchase price, or “basis.”
These improvements can include home additions, system upgrades, landscaping, and new appliances.
Keep detailed records of all capital improvements made to your home, as the IRS requires proof of these expenses in case of an audit.
If you don’t have records, you may end up paying more taxes than necessary.
Overall, the tax laws are designed to encourage homeownership, and many homeowners can take advantage of these tax breaks when selling their property.
Be sure to consult with a tax professional if you have any questions or uncertainties regarding your specific situation.
- NEWS SENTIMENT CHECK
- Overall sentiment:
neutral
Positive
“Single homeowners can shield up to $250,000 of home sales profit from capital gains taxes and married couples filing jointly can exclude up to $500,000, provided they meet IRS rules.”
“There are strict rules to qualify for the $250,000 or $500,000 capital gains exclusions, Ringbauer warned.”
Negative
“Despite a slump in U.S. home sales, many homeowners made a profit selling property in 2023.”
“But sometimes profits exceed the IRS limits for tax-free gains and \”it’s a shock\” for sellers, said certified public accountant Miklos Ringbauer, founder of MiklosCPA in Los Angeles.”