Understanding Tax Write-Offs for Sellers of Real Estate
Selling your home? Learn about tax write-offs for sellers to cut costs and keep more profit in your pocket. Maximize your deductions today.
If you’re currently in the process of selling your home or just joyfully accepted a competitive buyer offer, you may be reeling with the unexpected realization that capital gains are taxable, as are certain expenses. So, what tax write-offs for sellers are available?
You can minimize your capital gains tax — taxes levied on profits from selling capital assets — in two key ways: “Keep excellent records of all deductible expenses, and work with a tax professional any year you sell a house,” says Christopher Skinner, attorney at law and Certified Public Accountant (CPA) with over 20 years experience in public accounting and private industry.
We’ve sifted through the most up-to-date IRS tax guidance for home sellers (Topic 409 is your friend, along with Publication 523) and compared notes with Skinner to provide you with key tax breaks that can save you money.
Connect with a Top Agent to Help Maximize Value
Even rockstar agents can’t make your tax liability disappear, but HomeLight data shows that the top 5% of agents across the U.S. help clients sell their home for as much as 10% more than the average real estate agent, helping offset the tax bill.
What are capital gains?
Generally speaking, the government wants a piece of any “capital gains” (aka profit) you make from selling off assets like stocks, bonds, or — you guessed it — property.
Luckily, many of the pricey parts of homeownership, such as major renovations, mortgage interest, and property tax, can be deducted to lower what the IRS requires you to pay taxes on when you sell.
Your capital gain is determined by subtracting the original purchase price and eligible expenses (like home improvements and selling costs) from the sale price. If the resulting gain exceeds the IRS exclusion limit — $250,000 for single filers and $500,000 for married couples filing jointly — it becomes subject to capital gains tax.
Depending on how long you’ve owned the property, the tax rate may fall under short-term (ordinary income tax rates) or long-term (lower capital gains rates) taxation. By strategically planning your sale and leveraging available deductions, you can significantly reduce your taxable gain and keep more of your profits.
