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Thesa Chambers, Principal Broker

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thesa@centraloregonbuzz.com

70 SW Century Dr #110 Bend, OR 97702

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Tax Considerations for Home Sellers

Tax Considerations for Home SellersNow that the wrapping is all of the gifts and the tree is looking a little bedraggled, it’s time to take a look at your end of the year financial picture. Congress recently passed a bill extending a collection of tax breaks. While many of these only apply to special interests such as research and development, some of them apply to homeowners and could help lower your tax bill.

Debt forgiveness

Following the housing crisis of 2007, Congress passed the Mortgage Forgiveness Debt Relief Act. Originally slated to be a temporary measure, Congress has extended the Act three time … the most recent being the extension through the 2014 tax year. Under this rule, certain homeowners that lost their home through foreclosure, or qualified for one of the repayment adjustment plans, do not need to pay income taxes on the forgiven debt.

PMI deductions

Because of the volatile housing market in recent years, some lenders erred on the side of caution by requiring buyers to purchase private mortgage insurance (PMI). At the time, you could not write off the PMI even though your lender required it. But this year, homeowners that qualify and that itemize their deductions can now claim a tax deduction for the cost of paying PMI on both their primary home and on vacation homes.

Interest

Most people already know that they can get a tax break for the interest they pay on their mortgage. What they may not know is that the bigger the loan, the bigger the tax deduction. Just remember that it is not a huge deduction. For the average homeowner making between $40,000 and &75,000 the deduction amounts to just $50 per month or so. When your income is in the $250,000 range, however, the mortgage interest deduction is closer to $500 per month. Check with your tax advisor before taking out a mortgage just for the income tax break on the interest. Most states that have income tax also offer mortgage-holders a break on their taxes.

Property taxes

While property taxes take from your bottom line, the good news is that you can deduct your property taxes from your gross income. This reduces your taxable income and lowers you tax responsibility.

Sales tax deductions

Several states have no income tax. For homeowners in these states—Alaska, Florida, Nevada, South Dakota, Texas and Washington—Congress passed a temporary tax break so that in 2014, taxpayers may deduct paid state and local general sales tax instead of income tax.

Improvements

Homeowners that added improvements such as Energy Star heating and air conditioning units, energy efficient windows, water heaters, insulation or roofs may be able to take advantage of tax credits. Check with your local energy provider for information on what qualifies.

2015 Breaks

  • U.S. Code 121 exempts certain home sellers from paying income taxes on the profit of the sale of their home. Qualifications include: a profit of less than $250,000 for a single filer or less than $500,000 for a joint return and you lived in the house for at least two of the five years prior to the sale.
  • Selling Costs: These include legal fees, escrow fees, title insurance, inspections, real estate agent’s commission and advertising costs.
  • Moving deduction: If your home sale is due to relocation for work, you may be able to deduction transportation costs, travel to and lodging in your new city, and costs for storage.
  • Home improvements to sell your home: While general home improvements are not deductible unless they add to energy efficiency or another special program, you can deduct home improvements made within 90 days of closing on the sale of your home.
  • Points: When you refinance hour home, if you paid points in order to get a lower interest rate you can deduct a proportional share until the loan is paid.

Deductions can be confusing and change from year to year, so be sure to consult with your income tax professional for specific deductions you can take.

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About Thesa

As your real estate agent, I understand the value of providing the best possible service to every buyer and seller. Listening carefully to fully identify not only your desires but also your needs. Then work diligently to ensure that both are accommodated to the best of my ability. We will stay abreast on changing market conditions, trends, developments and research all factors that could affect the purchase or sale of your property.  My success and your happiness greatly depend upon the quality of the relationship we achieve.  Through personal redefinition of the professional standards set by most agents, I hope set myself apart from the rest and become the first person that you think of for all of your real estate needs.

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Thesa Chambers, Principal Broker West + Main Homes
thesa@centraloregonbuzz.com
(541) 771-7064
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The data relating to real estate for sale on this website comes in part from the MLS. Listing broker has attempted to offer accurate data, but is not guaranteed accurate. All information presented is deemed reliable but not guaranteed.

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