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What Will I Owe the IRS When I Sell My Home?

If you sold a home in 2015 (or plan to sell in 2016), you should be aware of the tax consequences. Start by calculating your “basis” which is your original cost plus any improvements over the years.

To determine your taxable profit, you will deduct this basis amount from your sales price. You will also deduct most closing costs such as real estate commissions, legal fees and conveyance taxes. If you are selling a PRIMARY RESIDENCE that you have owned for more than 2 years, you can then deduct $250,000 per individual or $500,000 per couple from the sales price. If you still have a profit after these deductions, that profit will be taxed at the capital gains rate - which, for most Americans is 15%, depending on your income level. I actually know people who move every 2 years to take advantage of this exclusion - but that requires a very liquid market and a lot of energy!

For most of us, our home is our sanctuary and not just an investment, especially here in our beautiful Salisbury / Sharon area. Still, when the time comes to sell, call your tax consultant and make sure you know the consequences.

 

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