It’s almost that time of year… yes, tax season is almost upon us! If you are selling a house in New Orleans, you will love these tax tips for selling your home! This article is for informational purposes only!
For specific questions, contact a trusted tax professional, or the IRS!
Not All Profits Are Taxable
As long as certain conditions are met, you can exclude a large portion of your profits. Typically, you will be able to exclude $250,000 from your tax return, and up to $500,000 if you’re filing a joint return. (If you sell for a loss, you won’t be able to take a deduction for that amount.)
The deduction is limited to one use every two years, and is only available when selling your primary residence. To qualify, you must have lived in the residence for at least two of the past five years.
It is important that whenever you move, your address is updated with the IRS.
If the requirements above cannot be met, you may still be able to exclude a portion of your profits from your income tax. There are many special conditions you can meet to receive a prorated, tax-free gain. If you need to sell because of a change in your health, job, or other unforeseen circumstances, you will be able to write-off a portion of the profit.
Reporting the Sale
If the closing agent gives you a 1099-S form, then you need to report the sale. This form provides information to the IRS regarding the proceeds from real estate transactions. To avoid reporting, make sure that you are able to exclude all profits. Let the agent know at the time of closing that the form will not need to be issued. Even if you are able to deduct all profits, if the form is issued, you still need to file it with the IRS, even if no money is owed.
Capital Gains Taxes
You will likely be subject to the capital gains tax if you are selling an investment property or house that you have owned for a brief amount of time. Your tax amount is dependent on you income. If your income is lower, you will pay no capital gains taxes. People in higher tax brackets can pay upwards of 20%. Short-term assets are typically taxed the same as ordinary income.
First-Time Homebuyer Credit
Depending on the dates you bought and sold on, you may have to pay all or part of the credit you received. Typically, if you move within 36 months of purchasing the home, the credit must be paid back upon the sale of the home. Special rules apply and can be found in Publication 523 from the IRS.
Deduct Selling Costs
You can deduct reasonable costs when selling your New Orleans house. This includes the closing costs, improvements made in order to sell the house, assessments, marketing costs, agent fees, and so on. Track every cent you spend in an effort to sell your home. Come tax time, this can amount to major deductions!
No matter what time of the year you sell, it is always important to seek the counsel of professionals. Consult your agent, accountant, and attorney to make sure you have set up the best terms for yourself.
Don’t stress too much about taxes when putting your house up for sale in New Orleans. Odds are Uncle Sam won’t be getting his hands on your profits.