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As us House net worth climbingowners are more likely to face Capital gains tax From selling property. But little-known tax strategies can help Shrink billsexperts said.
When selling your main home, there is a Special tax exemption This will provide a single file with a profit of up to $250,000 and a joint application of married couples for $500,000. But, you need to meet Certain rules.
More and more home sellers are Those thresholds exceededAccording to a 2024 report by real estate data company Corelogic. The report found that nearly 8% of U.S. homes sold in 2023 exceeded the capital gains tax limit of $500,000 for married couples, up from 3% in 2019.
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These percentages are even higher in high-cost states such as Colorado, Massachusetts, New Jersey, New York and Washington, according to the Corelogic report.
Tommy Lucas, a certified financial planner at Moisand Fitzgerald Tamayo in Orlando, Florida, said the exclusion rights of more than $250,000 and $500,000 are “becoming more common.”
Home sales profits are above the $250,000 or $500,000 threshold and are subject to a 0%, 15% or 20% capital gains tax based on your taxable income.
Increase your “basic” to reduce profits
Mark Baran, managing director of the National Tax Service of CBIZ, financial services firm, said many home sellers are not aware that they can reduce capital gains by increasing their “base” or the original purchase price of the home.
You can add a foundation by adding “capital improvements” such as refurbishing, adding new roofs, exterior upgrades, or replacing systems.
Your “adjusted basis” is usually the cost of buying a home, and any capital improvements made when owning the property.
“This adds up over time and can bring them all to ($250,000 or $500,000 in capital gains),” Baran said.
However, according to the IRS, you cannot add home repairs and maintenance, such as repairing leaks, holes, breaking or replacing broken hardware.
You can also reduce your home sales profit by adding Fees and closing fees According to Lucas, from buying and selling a home.
Some of these costs may include:
- Title fee
- Utility installation fee
- Legal and record fees
- investigation
- Transfer Tax
- Title Insurance
- The balance owed by the seller
Lucas added: “Maybe this will give you an extra few thousand.
