How does buying or selling a house affect my taxes?
Whether you are buying or selling a house, the process can be quite stressful, especially when thinking about potential tax implications.
Buying a House-
The new Closing Disclosure Form is one of the most important documents in the home-buying process. All home-buyers should receive this document and keep it in a safe place. This form basically gives a picture of all the closing transactions and provides a complete list of incoming and outgoing funds. The statement helps determine the basis of your new home, as well as what you can deduct on your taxes.
After purchasing a home, it may be beneficial to start itemizing if you weren’t already. As a homeowner, you can now deduct your:
Qualified home mortgage interest
*Points paid on a loan
*Real estate taxes
*Private mortgage insurances
Aa new home-buyer, you will want to be on the lookout for Form 1098, “Mortgage Interest Statement” which is used to report mortgage interest, including points. This form can help you claim these deductions on your Form 1040. Typically, Form 1098 is mailed to you in January.
Selling a House-
The new Closing Disclosure Form is equally as important to the seller since certain information reported on the form does affect your basis, which can affect how much gain or loss will be calculated when you report the sale of the property. The document also contains information about certain deductions that the seller may be able to claim.
The seller should also be aware of Form 1099-S, “Proceeds From Real Estate Transactions.” A seller will receive this form if the gain on the sale of the home is not entirely excluded from income.
The gain from your home can be tax-free up to $250,000 if single or $500,000 if married. One last thing to keep in mind: always keep your receipts! Since certain closing costs and home improvements can increase the basis of your home, it is important to keep your receipts to have proof of the increased basis. An increasing basis can reduce taxable income at the time you sell your home or increase the loss on the sale. Certain fees and closing costs that can increase your basis include:
Survey fees Recording fees
Owner’s title insurance
abstract of title fees
Examples of certain improvements that increase basis are:
Construction of a deck or garage
Addition of central air conditioning
Lawn sprinkler system
New roof or siding
Since there is a lot that goes into the buying and selling of a home, you may want to speak to a qualified tax professional so you don’t miss out on any of these potential tax benefits. Here at Red Rock Tax & Consulting, we are here to help with the questions and worries that come with buying a home and the selling of your home! Call us and make your appointment today!
Have any questions, give us a call here at Red Rock Tax & Consulting. We are here to help you get through the stress of taxes! We offer a free 30-minute consultation so call us and let’s get your appointment set up 435-635-2494
From all of us here at Red Rock Tax & Consulting we hope you have a spectacular day!
For more Tax Tips make sure you are following us on Facebook where we post Tax Tips every Tuesday.
Also, find out more about us at www.redrocktax.com
