Selling Your Home? Don’t Miss Out on These Tax Deductions

Home Staging Services in Washington D.C.

When first-time homeowners decide to sell their home, they’re often surprised to learn about the costs that come with the sale process. The good news is though, your home is your most valuable asset, which means selling it can get you some significant tax deductions.

We know home sales can be stressful, so to make things simple, we’ve put together a list of the tax deductions you can claim below!

Selling Costs

Any expenses that are directly related to the sale of your property can be deducted come tax time. This includes things like legal fees, agent commissions, advertising costs, home staging fees, title insurance, and escrow fees. You will subtract these costs from the final price of the sale to reduce your capital gains tax (more on that later).

In order to claim selling expenses as a deduction, you must have lived in the home for two of the five years before the sale and it must be your principal residence.

Property Taxes & Mortgage Interest

The amount of money you’ve paid toward property taxes and mortgage interest on your house up until the time it is sold can be claimed as itemized deductions on your taxes. Your property tax deduction caps out at $10,000, while you can claim the amount of interest paid on up to $750,000 of mortgage debt.

Keep in mind that it will only be valuable to claim these if your itemized deductions add up to more than the current standard deduction (how much you’re allowed to deduct total annually).

Home Improvements

The cost of any project that adds value to your home—referred to as a capital improvement—qualifies as a tax deduction, as long as it is completed within 90 days of closing your sale. Examples of capital improvements include home additions (bedroom, bathroom, garage, porch/deck), landscaping projects, system upgrades, insulation, interior renovations, and energy-efficient improvements.

However, it’s important to note that home repairs, such as roof repair, mold removal, plumbing or electrical issues, new paint, and general maintenance, are not included in this deduction category.

Capital Gains Tax

The capital gains tax is technically an exclusion, rather than a deduction, that limits how much of the profits from your sale can be taxed. Your profits, or capital gains, are the money you have leftover from your home sale after deducting selling expenses and any mortgage debt paid. Married couples can exclude up to $500,000 in profits, or up to $250,000 for singles, from being taxed as income.

Just like selling costs, you must have lived in your home as your primary residence for two out of the five years preceding your sale to qualify for the capital gains tax exclusion.

The best way to maximize your home sale profits is with expert home staging. In the Washington D.C. area, Red House Staging & Interiors can provide the home staging services you need to make the most out of your sale.

Contact us today to get started!