Tax Deductions When Selling A Home
When cashing out of your home, can you deduct the cost of the home warranty, property tax, that bathroom you remodeled? Below we give you some tips to help maximize your deductions. Consult your attorney or accountant before following any tips.
Table of Contents:
Sale of Residence – Real Estate Tax Resources
Ownership and Use Tests
Gains & Losses Relevant Resources
Reporting a Sale
Business Use or Rental of Home
More Than One Home
Relevant Miscellaneous Resources Not Included Elsewhere
Publication 523: Selling Your Home: for use in preparing tax returns
BankRate.com: "Capital Gains Home-Sale Tax Break a Boon for Owners"
Cornell.edu: U.S. Code 121: "Exclusion of Gain From Sale of Principle Residence"
Nolo Law: "The $250,000/$500,000 Home Sale Tax Exclusion"
Forbes :"9 Tax-Related Myths About Selling Your Home"
Washington Post :"IRS Rules Can Make Sale of a House Less Taxing"
Wall Street Journal: "Will Your Home Sale Be Tax-Free?"
For Dummies: "Tax Rules for Selling Your Home"
San Francisco Gate: "Real Estate Taxes vs. Property Taxes"
For homeowners to be eligible to claim an exclusion regarding the gain of a home sale, they must meet the ownership and use requirements. The ownership test requires the taxpayer to have owned the house for a minimum of two years. The use test requires the taxpayer to have lived in the house as his/her main home for a minimum duration of two years.
Resources for Requirements of Use and Ownership Tests, and Ways to Qualify:
IRS: ownership and uses tests, with exceptions and examples
Uncle Fed's Tax Board: examples of ownership and use tests
Ehow.com: "How to Meet Ownership and Use Tests"
J.K. Lasser: "Home Sale Exclusion"
Estate Plans Plus: "Exclusions of Capital Gains on the Sale of a Home"
JustAnswer.com: how to accurately calculate the IRS ownership and use test
Legal Assistance Attorney Yosefi Seltzer: "Overview of the Tax Consequences of the Sale of a Home"
USA.gov: "Tax Consequences of Selling a Home at a Profit or Loss"
20 Something Finance: "Are Losses on the Sale of a Home Tax Deductible?"
About.com: options for loss on the sale of a house
Charles Schwab: "Paying Capital Gains Tax on a Home Sale"
Kiplinger: new tax rules, including rules on gains/losses of home sales
How Stuff Works: "How Capital Gains Tax Works"
National Association of Realtors: how to calculate gain and other information about capital gain in real estate
IRS Home Sale Worksheets can assist consumers in factoring the adjusted basis of a home sold. The worksheets are a series of "if"/"then" solutions that allow the home-seller(s to determine the actual amount realized from a home sale.
Actual Worksheets, Examples, and How-To's:
Taxbrain home sales worksheets
Kitsapgov.com: Verification of Residency and Capital Gain or Loss Worksheet
Infoloom: three sold home worksheets and instructions
Taxmap: examples of completed worksheets
IRS Forms and Resources:
Reporting a Home Sale to the IRS , including forms to complete and return
Kiplinger: reporting a home sale on a tax return
New York State Department of Taxation and Finance: real estate property transfer report/sales reporting
Wisconsin Department of Revenue: "Individual Income Tax Sale of Home" Frequently Asked Questions
Investopedia: information on new tax regulations and reporting home sales
Business Use: According to the IRS, as stated in Topic 509 , deductions on the parts of one's home that are used for business might be plausible if they meet certain criteria.
IRS Criteria for claiming "business use" on a part of one's home
Form 8829: "Expenses for Business Use of Your Home"
Publication 587: "Business Use of Your Home"
About.com: Information on "Office-In-Home Tax Deductions"
Forbes : dos and don'ts of claiming a home office
Rental of a Home: The IRS website states that often the cash value or fair market value received from renting real estate or privately owned property is taxable to the homeowner or landlord as rental income. The following resources lay out laws and information regarding rental property and taxes:
IRS Publication 527: "Residential Rental Property"
Nolo Law: "Top Ten Tax Deductions For Landlords"
House Logic: "Tax Deductions For Rental Homes"
Investopedia: "Tax Deductions for Rental Property Owners"
San Francisco Gate: "Tax Write-Offs for Rental Properties"
Tax information, Deductions, Implications, and Guidelines for Those Who Own Multiple Homes or Properties:
San Francisco Gate: "Tax Deductions for Real Estate Taxes on Multiple Properties"
Investopedia: "Tax Breaks for Second Home Owners"
Fox News: tax implications when selling a home, including for those with multiple properties
Marketwatch: taxes on the sale of a vacation or second home
Reference.com: "Capital Gains on Sale of Second Home"
Bankrate: "Second-Home Tax Rules Set to Change"
Financial Web: "Selling Your Second Home without Capital Gains Taxes"
Wall Street Journal: tax mistakes that many home-owners make when selling their vacation home
EHow.com: tax questions regarding the sale of a second home
MSN Real Estate: "Tax Crackdown on Second Homes"
Realtor.com: tax benefits when selling your home
Investopedia: "10 Most Overlooked Tax Deductions"
Internal Revenue Service: "Deductible Taxes" for real estate
IRS Publication 503: tax information for homeowners on what is and isn't deductible
Kiplinger: tax "Deductions for Homeowners"
Nolo Law: "Deducting a Loss on the Sale of a Home"
Fox Business: tax write-offs for homeowners
About.com: "Home Buying/Selling", and taxes
The information in this article is intended to provide guidance on the proper maintenance and care of systems and appliances in the home. Not all of the topics mentioned are covered by our home warranty or maintenance plans. Please review your home warranty contract carefully to understand your coverage.