I Have Cash in Hand to Buy a House: What Do I Report to the IRS?
Most homebuyers are going to need a mortgage loan to buy a house, but these days it’s not unheard of for buyers to purchase their home with cold, hard cash. Whether it’s money saved, equity from the sale of a previous home, a cash windfall, or using a cash offer platform from a lender, buying a home for cash has become more and more common.
As a buyer, you might think that paying cash for a house is the easiest, most hassle-free way to buy — and quite often, it is. But when large amounts of cash change hands, there is one thing you always need to consider: tax ramifications.
Taxes aren’t something we really like to think about, but it’s important to know what, if anything, you need to do in terms of what the IRS might require when you buy a house with cash. Do you report the sale? Are you responsible for any additional taxes or fees? And what about potential write-offs for the purchase? Do you still qualify for any kind of tax break?
We’ve talked to real estate agents who are in the know, as well as tax specialists who understand just what the IRS might require from you as a cash buyer, to help you decide whether you should consider paying cash for that new home.
Who buys homes for cash, and how does it work?
Santa Barbara real estate agent Maureen McDermut, who has more than 30 years of experience in the industry, says that right now, cash buyers account for about 80% of her clientele.
“A lot of people pay cash, especially in situations where there are multiple offers,” she says. “Cash is king, and it does speak to people.”
McDermut says that in her area, where there is a fairly wealthy demographic, there are cash sales on a regular basis. But cash sales also seem to have become a big bargaining chip for buyers across the country.
According to a survey by the National Association of Realtors (NAR), as of January 2024, the proportion of buyers paying cash was 32%, marking the highest rate since 2014. In 2023, the metro areas with the highest concentration of cash buyers were Macon, Georgia, where 61.5% of homes were purchased with cash, Naples, Florida, with 58.9%, and Myrtle Beach, South Carolina, at 56.3%
