{"id":7276,"date":"2023-06-10T04:02:21","date_gmt":"2023-06-10T04:02:21","guid":{"rendered":"https:\/\/www.irstaxapp.com\/?p=7276"},"modified":"2023-06-10T04:02:36","modified_gmt":"2023-06-10T04:02:36","slug":"selling-your-house","status":"publish","type":"post","link":"https:\/\/www.irstaxapp.com\/selling-your-house\/","title":{"rendered":"Selling Your House ? 5 Crucial Taxation Points You Must Know !"},"content":{"rendered":"\n<figure class=\"wp-block-embed is-type-video is-provider-youtube wp-block-embed-youtube wp-embed-aspect-16-9 wp-has-aspect-ratio\"><div class=\"wp-block-embed__wrapper\">\n<div class=\"jeg_video_container jeg_video_content\"><iframe loading=\"lazy\" title=\"selling your home ? 5 taxation points to know\" width=\"500\" height=\"281\" src=\"https:\/\/www.youtube.com\/embed\/kMVyzNsz_uc?feature=oembed\" frameborder=\"0\" allow=\"accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture; web-share\" allowfullscreen><\/iframe><\/div>\n<\/div><\/figure>\n\n\n\n<p>When selling your house, you&#8217;re likely focused on getting the best possible price and perhaps finding your next dream home. But what about the tax implications of the sale? While taxes might not be the most exciting aspect of selling your home, understanding them is essential to avoid surprise bills and to make the most out of your property investment. <\/p>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_62 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<p class=\"ez-toc-title\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-662d8870d3b55\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-662d8870d3b55\"  aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/www.irstaxapp.com\/selling-your-house\/#Video_5_Most_Important_Points_to_Know_if_You_Are_selling_Your_Home\" title=\"Video : 5 Most Important Points to Know if You Are selling Your Home\">Video : 5 Most Important Points to Know if You Are selling Your Home<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/www.irstaxapp.com\/selling-your-house\/#1Capital_Gains_Tax\" title=\"1.Capital Gains Tax\">1.Capital Gains Tax<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/www.irstaxapp.com\/selling-your-house\/#2Home_Improvements_and_Selling_Costs\" title=\"2.Home Improvements and Selling Costs\">2.Home Improvements and Selling Costs<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/www.irstaxapp.com\/selling-your-house\/#3Depreciation_Recapture\" title=\"3.Depreciation Recapture\">3.Depreciation Recapture<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/www.irstaxapp.com\/selling-your-house\/#41031_Exchange\" title=\"4.1031 Exchange\">4.1031 Exchange<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/www.irstaxapp.com\/selling-your-house\/#5State_Taxes\" title=\"5.State Taxes\">5.State Taxes<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Video_5_Most_Important_Points_to_Know_if_You_Are_selling_Your_Home\"><\/span>Video : 5 Most Important Points to Know if You Are selling Your Home<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"1Capital_Gains_Tax\"><\/span>1.Capital Gains Tax<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The first important point to consider when selling your house is the capital gains tax. When you sell your home for more than what you paid for it, the difference is considered a capital gain, and you may have to pay tax on that amount. The IRS exempts a portion of these gains for those who meet certain requirements.<\/p>\n\n\n\n<p>As of the last update (September 2021), if you&#8217;re single, you can exclude up to $250,000 of your gain from your income, and if you&#8217;re married filing jointly, the limit doubles to $500,000. However, to qualify for this exclusion, you must have owned the home and used it as your primary residence for at least two of the five years before the sale.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"2Home_Improvements_and_Selling_Costs\"><\/span>2.Home Improvements and Selling Costs<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>A second crucial point to understand is that any improvements made to the property or selling costs can be added to the cost basis of your home, reducing the taxable capital gain. For instance, if you initially purchased your home for $200,000, spent $50,000 on home improvements, and incurred $10,000 in selling costs, your cost basis would be $260,000.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"3Depreciation_Recapture\"><\/span>3.Depreciation Recapture<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>If you&#8217;ve ever used your home for business or rented it out, you&#8217;ve probably claimed <a href=\"https:\/\/www.irstaxapp.com\/depreciation-accounting-for-taxes-under-26us-code\/\">depreciation<\/a> on your tax returns. Depreciation recapture is the tax on the gain realized on the sale of depreciable capital property. When you sell your house, you must recapture the depreciation and pay taxes on it. This tax rate is typically 25% but can vary depending on your income.<\/p>\n\n\n\n<p>Keep in mind that if you sell the property for less than or equal to the adjusted cost basis, you don&#8217;t have to pay depreciation recapture tax. In case of a loss, it may be possible to offset other capital gains. Have you tested our <a href=\"https:\/\/www.irstaxapp.com\/depreciation-calculator-for-home-office\/\">depreciation calculator for home office<\/a>?<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"41031_Exchange\"><\/span>4.1031 Exchange<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>If you&#8217;re planning to reinvest the proceeds from the sale of your home into another property, consider a 1031 exchange, named after <a href=\"https:\/\/www.law.cornell.edu\/uscode\/text\/26\/1031\" target=\"_blank\" rel=\"noopener\">Section 1031 of the U.S. Internal Revenue Code<\/a>. This allows you to postpone paying capital gains taxes if you reinvest the proceeds in similar property as part of a qualifying like-kind exchange. There are strict rules about the timing of the purchase and the type of property you can buy, so it&#8217;s important to plan carefully.<\/p>\n\n\n\n<p>For example , toqualify as a 1031 exchange, both properties involved in the exchange must be \u201clike-kind,\u201d meaning they must be of the same nature, character, or class as defined by the IRS. Then there are strict time limits for completing a 1031 exchange .These time limits are very strict and cannot be extended, even if the 45th day or 180th day falls on a weekend or legal holiday.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"5State_Taxes\"><\/span>5.State Taxes<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Lastly, don&#8217;t forget about state taxes. Depending on your location, you might need to pay state capital gains tax, transfer tax, or other types of tax on the sale of your home. State taxes can add significantly to your tax burden, so they should definitely be factored into your calculations when selling your house. If you are fortunate to be resident of any of the following states, you do not have to pay any capital gains tax to the state.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Capital Gains Tax Free States!<\/h3>\n\n\n\n<ol>\n<li>Alaska<\/li>\n\n\n\n<li>Florida<\/li>\n\n\n\n<li>Nevada<\/li>\n\n\n\n<li>South Dakota<\/li>\n\n\n\n<li>Texas<\/li>\n\n\n\n<li>Washington<\/li>\n\n\n\n<li>Wyoming<\/li>\n\n\n\n<li>Tennessee<\/li>\n\n\n\n<li>New Hampshire<\/li>\n<\/ol>\n\n\n\n<p>Readers are advised  to check the most recent tax regulations in your specific state because tax laws can change. Also, consider <a href=\"https:\/\/www.irstaxapp.com\/tax-attorney-vs-cpa\/\">consulting a tax professional <\/a>to ensure that you have the most accurate and up-to-date information.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>When selling your house, you&#8217;re likely focused on getting the best possible price and perhaps finding your next dream home. But what about the tax implications of the sale? While taxes might not be the most exciting aspect of selling your home, understanding them is essential to avoid surprise bills and to make the most [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":7282,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[8],"tags":[],"amp_enabled":false,"_links":{"self":[{"href":"https:\/\/www.irstaxapp.com\/wp-json\/wp\/v2\/posts\/7276"}],"collection":[{"href":"https:\/\/www.irstaxapp.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.irstaxapp.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.irstaxapp.com\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.irstaxapp.com\/wp-json\/wp\/v2\/comments?post=7276"}],"version-history":[{"count":3,"href":"https:\/\/www.irstaxapp.com\/wp-json\/wp\/v2\/posts\/7276\/revisions"}],"predecessor-version":[{"id":7283,"href":"https:\/\/www.irstaxapp.com\/wp-json\/wp\/v2\/posts\/7276\/revisions\/7283"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.irstaxapp.com\/wp-json\/wp\/v2\/media\/7282"}],"wp:attachment":[{"href":"https:\/\/www.irstaxapp.com\/wp-json\/wp\/v2\/media?parent=7276"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.irstaxapp.com\/wp-json\/wp\/v2\/categories?post=7276"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.irstaxapp.com\/wp-json\/wp\/v2\/tags?post=7276"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}