Tax Tips for Us
There’s a refresher article in the Washington Post of tax tips for us. “While the 2019 tax filing season may be over, if you’re buying or selling real estate this year, you may want to consult a tax expert as well as a real estate agent.
Financial adviser Cameron McCarty, president of Vivid Tax Advisory in West Des Moines, Iowa, has some tax tips for us.
For Sellers:
There is a capital-gains tax exclusion of up to $250,000 for a single person or $500,000 for a married couple filing jointly. This exclusion is a boon to sellers to home sellers — especially if it results in a sale that avoids capital gains taxes.
If the sale price minus the purchase price exceeds those amounts, it is still possible to reduce or even eliminate tax by showing that you have increased the basis on the house from the purchase price. on your property. It is important that you keep accurate records to justify the increase in your basis. The home’s basis is the purchase price plus improvements to your home, including remodeling and repairs.
Sellers can use this exclusion every time you sell a primary residence, so long as:
1. You’ve owned and lived in the home you are going to sell for two years, and
2. You haven’t used the exclusion from past profits from a home sale in the last two years.
For Buyers:
Homeowners who purchased a home in 2018 can deduct interest expenses on up to $750,000 of mortgage debt from their income taxes, which may allow them to itemize their returns and forgo the standard deduction.
If you are considering buying a home by pulling money out of traditional or Roth IRA to help purchase your home There are specific eligibility rules for anyone considering withdrawing from a Roth IRA and tax implications for both choices. The IRS offers an exception to the traditional IRA 10 percent early withdrawal penalty for first-time home buyers. Consult a financial professional to make sure you’re making the smartest decision.
For SALT Tax Payers
There are some big changes in the deductability of property taxes. In the last big tax bill that Congress passed, the law limits the amount of state and local taxes (SALT) to $10,000. That means that if your real estate property taxes are $10,000 and your state income taxes are $10,000, you will be limited in deduction a grand total of $10,000. If your property taxes are $3,000 and your state income taxes are $5,000, you will get the full benefit of deducting both as the total amount is $8,000 and below the limit of $10,000.
Whether you’re buying or selling, consult a professional for tax advice.
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