Albert Einstein once lamented, "The hardest thing in the world to understand is the income tax." If you buy, sell, finance or own real estate, it gets even harder.
Yet there's no reason to pay more than the minimum, and the Internal Revenue Code actually gives property owners lots of tax breaks for buying a home or owning one.
According to Art Ford, a certified public accountant in Boston, "For many homeowners, real estate taxes and mortgage interest are by far some of their biggest federal income tax deductions. If I pay $1,500 a month in mortgage interest, that's potentially an $18,000-a-year deduction."
For some homeowners, especially those with small mortgage balances who live in places with low state income and property tax areas, the good news is that the new standard deductions ($13,850 if filing single or married filing separately, $27,700 if married filing jointly) may mean that you no longer need to itemize deductions for the purpose of lowering your taxable income. These larger deductions may already exceed the amount of income-lowering that itemization would bring, and may simplify the filing process for you. For others, the changes aren't as beneficial.
10 tax questions and answers for homeowners
In order to help keep their tax bill as low as possible, current homeowners and aspiring first-time homebuyers should know the impacts that the 2017 Tax Cuts and Jobs Act (TCJA) changes continue to have on their tax returns. Here are some commonly asked questions and answers about taxes and homeownership:
1. Can I still deduct mortgage interest?
One of the most popular and lucrative tax benefits for homeowners has always been the deduction for mortgage interest. Fortunately, although TCJA did modify it, the deduction wasn't eliminated. As well, high home prices and higher mortgage rates in 2023 mean that new homeowners are likely paying a lot more interest than has been the case in some years, so more homeowners will likely be looking to take advantage of the mortgage interest deduction when filing their 2023 tax returns.
As with all things tax-related, however, the changes to the tax code did add certain complications.
For homes purchased after December 15, 2017, mortgage interest on total principal of as much as $750,000 on qualified residence loans can be deducted. For married taxpayers filing a separate return or single homeowners, the new principal limit is $375,000.
For homes owned before December 16, 2017, the older limits are "grandfathered in" -- that is, carried forward, so the maximum principal balance on which interest can be deducted remains $1,000,000 -- and marrieds filing separately can deduct $500,000 each.
Any mortgage interest you pay will be reported to on the Form 1098 your lender or servicer will send to you. You can also get working figures of the principal and interest portions of your mortgage payment by using a mortgage calculator.
2. Is home equity loan mortgage interest still deductible?
In a word, no. Or, probably not, at least for some of the most common uses. One of the biggest tax changes that came from the TCJA was the elimination of the separate provision that allowed Americans to deduct interest on home equity debt of as much as $100,000 no matter what the money was used for. Starting in tax year 2018 and continuing forward, the change in the tax law strictly limits instances where interest on home equity loans or lines of credit can be deducted.
The deductibility of home equity interest is now only allowed where the funds have been used to "buy, build or substantially improve" a qualified residence. Interest deductibility is still limited to not more than $100,000 in second lien debt, and is subject to the total mortgage debt limits discussed in item number 1 above. If a home equity loan or line of credit was used for any other purpose, such as to cover personal expenses like paying off credit card debts, the interest paid is no longer deductible. If you do use the funds to "buy, build or substantially improve" your home and will be looking to deduct interest you paid, the onus is on you to keep good records of the expenses you covered with those funds should your return be audited at some future date.
These conditions also apply to any money you might have extracted from your home in a cash-out refinance. Interest paid on proceeds used to "buy, build or substantially improve" remain deductible up; interest paid on those funds used for other reasons (debt consolidation, etc.) are not. Remember to keep good records of any such expenditures.
If you had a home equity loan or line of credit, and interest you paid will be reported to you by the lender in Form 1098, just as it would be for your first mortgage.
3. Are mortgage closing costs tax deductible?
In general, the only settlement or closing costs you can deduct are home mortgage interest and certain real estate taxes. You deduct them in the year you buy your home if you itemize your deductions. Certain other settlement or mortgage closing costs aren't deductible right away, but rather are added to the "basis" value of your home and may provide some tax offset should you sell your home.
"Basis" is the value of your home for the purposes of calculating future capital gains taxes. Essentially, when you sell your home, your gain (profit) or loss for tax purposes is determined by subtracting its basis (original calculated value when you bought it) plus the cost of any improvements from the sales price (plus sales expenses, such as real estate commissions). The larger your basis, the smaller the gap to the current value of the home. In turn, this reduces the profit on which taxes are levied.
Mortgage-related items you'll pay that can be added to the basis include things like abstract fees (abstract of title fees), legal fees (including fees for the title search and preparation of the sales contract and deed), recording fees, owner's title insurance and more.
See IRS Publication 530, "Tax Information for Homeowners" and look for "Settlement or closing costs" for more details.
4. Is mortgage insurance tax deductible?
If you put down less than 20 percent when you purchased your home, chances are you're paying mortgage insurance. The deductibility of Private Mortgage Insurance (PMI) premiums has been an on-again, off-again affair for years; unfortunately for homeowners in 2023, it's still "off", according to IRS Publication 936.
Deductions for PMI (or MIP for FHA-backed loans) are not part of the tax code, but in the years after the financial crisis were routinely re-authorized by Congress as parts of other bills and "extended" to cover the most recent tax year. However, that wasn't the case for tax year 2022 or 2023, but this may change in the future, of course.
The official IRS code covering the deductibility of mortgage interest (which, if again deductible, will include PMI premiums) can be seen in Publication 936. Since the deductibility of PMI and MIP could be reauthorized at any time, it's a good idea to check both the IRS website and Publication 936 before you file your returns.
Even when PMI is deductible, there are caveats and limitations. For example, in tax year 2021 (the last year where PMI premiums could be deducted), the PMI policy's mortgage had to be originated after 2006; as well, the deduction for PMI premiums was reduced once the homeowner's Adjusted Gross Income (AGI) exceeded $100,000 ($50,000 if married filing separately) and the deduction was completely eliminated with an AGI above $109,000 ($54,400 married filing separately). When they are available, deductions for mortgage insurance premiums are treated exactly the same as mortgage interest.
Of course, with the standard deduction raised significantly as a part of the Tax Cuts and Jobs Act of 2017 (TCJA), many homeowners who might have formerly itemized their deductions in order to deduct the mortgage interest they paid now simply take the standard deduction, which simplifies filing returns.
If you should file an itemized return on Schedule A, and mortgage insurance premiums later become retroactively deductible for tax year 2023, you might consider filing an amended tax return, to capture the MI deduction for 2023, if it's worth it in your situation.
5. Are mortgage points paid in a home purchase deductible?
The IRS has a points deductibility flowchart and discussion that you can use to see if points are fully deductible. This is covered as part of Publication 936, Home Mortgage Interest Deduction on the IRS website. In general, you must have paid points to build, buy or improve your primary residence in order to deduct the entire amount in the year they were paid. Otherwise, they may still be deducted but on a prorated basis.
Are discount points I paid to refinance deducted differently?
This deduction is often overlooked, but it could be worthwhile. When you pay points on a refinance, they have to be prorated.
For example, if you paid $3,000 in points on a 30-year mortgage you refinanced previously, you can deduct $100 a year for 30 years. But if you refinanced again in 2023 and have prorated points that have not yet been deducted -- for example, you are 10 years into a 30-year loan and have only deducted $1,000 of $3,000 in points paid -- you can deduct the remaining $2,000 in the year you refinance.
If you paid points for a mortgage in 2023, these will also be reported to you on Form 1098.
6. Can I deduct my property taxes?
In addition to tax law limitations pertaining to mortgage interest deductions, there are also limits to your property tax deduction. Since tax year 2018, your total state and local tax (SALT) deduction has been maxed out at $10,000; prior to 2018, the amount of the SALT deduction was not limited.
In a low-or no-income tax state, on in a place where your property tax bill isn't particularly high, the $10,000 cap may not impact you. However, if you're buying a home in New York (or other high-tax state), you may find that a portion of your property tax bill is no longer deductible from your income.
Which state and local taxes are and aren't deductible are discussed in Tax Topic 503.
7. Will I owe capital gains tax if I sold my home in 2023?
Until 1997, once you hit the age of 55, you had the one-time option of excluding up to $125,000 of gain on the sale of your home providing it was your primary residence.
Now, anyone, regardless of age, can exclude up to $250,000 of gain (or $500,000 for a married couple filing jointly) on the sale of a home. This means most people may pay no tax unless they lived in their home for less than 2 out of the last 5 years.
It's important to remember that capital gains are just that: gains. These are increases in value above the original purchase price plus any improvements (so-called "basis", as above). For example, if you bought a home to live in for $250,000, made $100,000 in improvements to it and sold it for $600,000 just three years after you bought it, your "basis" cost would be $350,000, so the amount of capital gain you would have earned from your home sale in this case would be $250,000, and you wouldn't owe any tax on the amount.
That said, IRS Publication 523 notes that you generally can't deduct repairs or maintenance, only "improvements" that are designed to increase your home's value. Unfortunately, the rules for what's a "repair" versus an "improvement" are pretty vague.
For instance, the IRS says fixing a broken windowpane is a repair, but replacing it as part of a project to swap out all of your home's windows is an improvement. So, consult with a tax professional or read IRS Publication 523 for further guidance.
If you still have taxable profits on your home after factoring in all of the above, you'll report your gains on a Schedule D, Capital Gains and Losses. Note: Capital losses on primary residences are not deductible.
8. Should I itemize home-related deductions or use the standard deduction?
To get an idea as to whether you should still itemize or consider switching to using the standard deduction, start with your tax returns for 2022. If your situation is similar in 2023, and your total itemized deductions in 2022 were below the new standard deduction, you probably no longer need to itemize to get the biggest deduction. However, if your total deductions still exceed the new standard deduction, you'll want to consider the new rules for deduction, including any SALT limitations that may impact you.
By way of example, for 2017, the standard deduction for a married couple was $12,700. Using this deduction, a married couple that paid $15,000 in mortgage interest and also had $3,000 in charitable contributions and $6,000 in state and local taxes would have been able to reduce their taxable income by an additional $11,300 by itemizing. For 2018, however, the standard deduction for a married couple was $24,000, so this example couple wouldn't be any better off by itemizing.
For tax year 2023, the threshold for this same married couple has increased to $27,700, so the standard deduction would be greater than total of the itemized deductions. In addition, the standard deduction is increased for taxpayers over 65; for single taxpayers over 65, the amount for 2023 is $15,700, and for married couples filing jointly where one spouse is over 65, the standard deduction is $29,200 ($30,700 if both spouses are aged 65 or older).
Given recent mortgage interest rates, a homebuyer might need a pretty big mortgage and high state and local property taxes to make it worth itemizing. For example, to get to the $27,700 married-filing-jointly standard deduction using mortgage interest alone, a homeowner with a 5% interest rate would need a mortgage amount of about $557,800. Of course, a higher interest rate on the mortgage means it takes a smaller loan to hit that $27,700; for example, a 6.5% interest rate on a 30-year mortgage needs only a $428,350 amount to rack up $27,702 in interest in the loan's first year.
A more typical homeowner with a 4%, $300,000 loan would spend only $13,888 in interest in the first year, and so would have a $13,112 gap to cover using state and local taxes (and any other deductions that can be itemized) just to get to the $27,700 threshold. However, at a rate of 6%, the interest generated would be $20,883, so there would be a smaller amount to cover to make it worth filing an itemized return.
While typically about 30 percent of taxpayers itemized deductions each year before 2017's TCJA, this number has dropped sharply. The Tax Foundation estimated that only 13.7% of filers itemized deductions in 2019, and estimates for tax year 2022 were down to about 8%, so a lot fewer taxpayers need to use the mortgage interest deduction to help lower their federal tax bill
9. What home expenses are tax deductible?
When it comes to home expenses, from a tax standpoint, they're broken down into two categories: the cost of any improvements and the cost of any repairs.
In general, you can deduct the cost of improvements, but you can't deduct the cost of repairs.
There are a number of home improvement expenses you can deduct on your taxes. Most big-ticket items, such as additions to the house, a swimming pool, a new roof or a new central air-conditioning system, are considered tax deductible. Other tax-deductible home expense items include adding an extra water heater, storm windows, an intercom, or a home security system.
When you make home improvements, such as installing central air conditioning, adding a sunroom or replacing the roof, you can't deduct the cost in the year you spend the money. However, if you keep track of those expenditures, they may help you reduce your taxes in the year you sell your home, as these improvements become part of your home's basis.
Unless your property is a rental or investment, you don't get tax breaks for items such as Hazard insurance, Homeowners association (HOA) dues, any principal payments you make, general closing costs like appraisal fees or title insurance or any local assessments to improve your neighborhood.
10. Do deductions phase out as income rises?
The Tax Reform and Jobs Act eliminated through 2025 the income-based phase out of itemized deductions (the so-called "Pease limitation", named for the congressman who introduced the legislation in 1991). Formerly, deductibility was reduced for single filers with adjusted gross incomes above $261,500 and $313,800 for married persons filing jointly and there were other complicated components as well.
The bottom line for homeowner tax changes in tax year 2023
Now several years old, the Tax Cuts and Jobs Act was a game-changer for many homeowners, especially those in states with high state and local property taxes, and for people using home equity as a portion of their day-to-day finances. For many folks, the changes mean that they will no longer need to endure the hassle (and possibly expense) of itemization, simplifying their tax filing process.
Of course, as is always the case with taxes, there are plenty of twists and turns; depending on your situation, you may (or may not) be eligible for additional tax breaks, such as write-offs for a home office if you’re self-employed or those for a second home. It’s always worth consulting a tax professional who can help you understand how using your principal residence and any other properties you may own can affect your tax liability.
Related: Will mortgage debt forgiven in my loan modification be taxed as income?
Keith Gumbinger contributed to and revised this article, as did Craig Berry
Before the new tax laws went into effect, what tax years were you allowed to deduct mortgage interest on cash outs for HELOC or refinances no matter how you spent proceeds?
The Tax Reform Act of 1986 allowed for the deduction of interest on home equity, so it would have been from that point until the TCJA of 2017.
Learned some new stuff with very detailed information.
How are capital gains treated tax-wise on the sale of a secondary residence (lake home) to the adult children?
We bought our house in 2006 for $258,000.00 and sold it in 2018 for $255,000.00 our home improvements were $70,000.00 can we deduct a loss of $73,000.00 on our taxes
Thanks for your article. If I sell my home that has 500K equity and am single I know that only 250K is tax free but if I took the other 250K and purchased another property with it does that change anything about whether the other 250K is taxed or not. Thank you.
Hi We purchased a house in Apr 2014 and planing to sale in Dec 2018 - it is our primary house. Do we owe capital gain tax since we did not own the house for 5 year ? Thanks
Thank you for this useful article!
I bought a house April 16th 2017 and did my homestead. When should I see my mortgage payment go down. The house was a rental now it is my primary home. Thank you
Thank you for taking the time to provide such an informative and helpful post.
I only paid $484.00 interest on my mortgage in 2016 because I have almost paid off and no other interest to itemize. Do I file standard with a 40,000.yearly salary.
The only reason to itemize your deductions is if your deductions for mortgage interest, property taxes, medical expenses, etc. total more than the standard deduction that is available for your filing class.
Parent lived in home (I owned) for years. My primary residency is in another state. If I have lived in the home on and off for just under two of the last five years (to care for my parent), can I still deduct the "permanent" upgrades and improvements that I have made over the years to the home -- such as a water filtration system, full duct work and installed ac, water heater,electrical etc. even though I may not have have lived there myself for the full two years? Having sold the house after living there for half of the year, I also made other permanent upgrades that add to the structural value of the house. Do I qualify to take the permanent upgrades deductions? Thank you.
Ann, Thanks for your comment. The rule is usually that you must have lived in the home as a principal residence for two of the last five years. You definitely want to consult with a tax professional to be sure of all the ins and outs. -Tim, HSH
My father passed in 2015 and he willed the house to me. I went thru probate and got my name on the deed. I couldn't sell it because I was so devastated by finding him dead on the side of the house working on the gate latch. I still am and I am still in his house since he died October 23rd. I refinanced it in my name because I had debt and the house was not paid off. I only owe $52k. It was appraised at 300k. I am just an Accounting Clerk and unemployed at this time. Tough time. If I sell it soon, how much capital gain taxes would I have to pay if I were to sell it for only $250k?
Hello we closed on our home end of july and first payment was 1 st of September however first mortgage lender sold the loan to wells fargo bank and received a letter from the first mortgage lender that our 1 st payment will be due in October to wells fargo bank . however on the corner there is a stamp saying payment is still due to them on the 1 of September . I don't get how they are owed if some other bank has the loan now ? can someone help . thanks
Hi! We bought a house a year ago. We may move to a new house (for a better school district). Can we sell our house before 2-years and not be taxed? We we're told that we may get dinged for selling before 2 years. Thank you in advance!
We sold our house in MN in August 2016. We purchased the house for $174,900 in 2001 and sold for $215,000. We have $25,000 of improvements (documented). We have not lived in our house since 2011 because we moved to AZ; therefore we rented the house for the past 5 years. Since we are using a VA for our new house we are not required to put money down. After figuring out what we could be taxed on (capital gain), it came to around $15,500. Are we better off putting $15,500 down on our new house and avoiding any capital gain taxes, or will we still pay tax on that amount regardless if we keep it or put it down as a down payment? Hope that makes sense :)
i got married this year. we both sold our principal residences and bought a new home. can we take the exemption on both houses?
Bought a home in 2007 as my primary residence. I got married and purchased another home with my husband in 2014 and rented my 2007 home out. I sold my 2007 home this month (July 2016) and made a 40k profit and wondering if I am able to be exempt from any capital gains taxes since it was my primary residence within the last 5 years and the profit from the home was less than 250k.
I purchased a townhouse in 2002. I bought a house in 2012 and started renting the townhouse. I sold the townhouse this year for $2k more than I bought if for. Will I have to pay capital gains tax on the $2k because I haven't lived there 2 of the last 5 years? Can you confirm I will not have to pay capital gains on the difference between what I sold for and the mortgage amount when I started renting?
My brother is selling his house that he bought 15 years ago and lived in it for 7 of the 15 years, however, he has not lived in the last 7 years, He has been renting the property. Anyways, he wants to now sell the house and clear a profit of $100,000 which he wants to roll over into another property which i believe is called a 1031C transaction. Can he do this? Also, after he purchases the property is he allowed to take a home equity line of credit out on the house with all the equity that he will have in his new house? I also would like to know this because he is wanting to know how much money he will actually lose or have to pay in capital gains taxes if he doesnt purchase or roll it over. If you can please shed light on this process i would gladly appreciate it asap. thank you
QUestion: I am selling my home in Maryland - my primary residence for 15 years. HOever, in the past year , I have lived seasonally ( renting) in Delaware. Do I have a tax liability to Delaware on the sale of my MD home ?
Susan, How much money are you expecting to make on the sale? -Tim
Hello, If I moved into a home in June, am I responsible for paying the full year of county taxes or should it have been prorated?
Settlement for my new home occurred in March 2015. After one month my home loan was purchased by a major bank, which I understand routinely happens. As the statements arrived I paid each one immediately. It appears the bank would then send another statement as soon as it received my payment. As a result, I overpaid or prepaid in 2015 by 4 months. Earlier this year when filing Federal taxes for 2015, this information was included on the 1098 from the bank, indicating I could not deduct the additional interest. Can I add these monies now when filing Federal taxes for 2016? Note: Made only 8 mortgage payments in 2016.
Do we have to put all of the profits from selling our first home into our next house or we can use some of the profits for it and the rest to pay some financial obligations?
Any profit from the sale of your old home are yours to do with as you please. However, many folks that are buying another home use most or all of the proceeds from their sale, as this helps to lower the amount being financed on the new home, saving interest charges over the long haul.
I bought my primary residence in 2006 for 321k then sold it in November 2015 for 298k, filing married and separate. I just bought a new house in February 2016. I was informed by someone that because I bought my new house in 2016 (less than 6 months from the sale of my previous home) that I would be able to have a tax break. Is that true and if so, how would I file that claim?
Tina, I have never heard of that tax break, but I am far from a tax expert. You should contact a tax professional. Thanks for commenting, Tim Manni, HSH.com
Hi, we moved from WA to CA since July 2015. We are renting in CA and not owning any property in CA. We left our house in Seattle for a friend family to stay off and on, and didn't sell it yet. I'm sure they are using our address to file their tax. My question: is our primary property in WA considered as rental property? Can we still use full property tax deduction since we're paying for it? Thanks.
LH, If you're living in CA, getting your mail delivered to you there, etc., your home in WA is no longer your primary residence, so no, you cannot claim the tax deduction. However, we still recommend you consult with a tax pro to be 100% sure. Thanks for commenting, Tim Manni, HSH.com
In 2006 my wife bought a condo for 225k with an 80/20 interest only loan. The property then went under water in 2009 and she was forced to rent out as she couldn't sell it. Since then, we built a house together, which is currently our primary residence. We used the equity in this new house to get a HELOC in order to pay off the high interest 2nd loan on her original condo. The market has now come back and we have sold her original condo for a profit. We still owe 177k on the condo's 1st mortgage and about 26k on the HELOC (2nd mortgage). My question is whether I can deduct the HELOC amount when we use the profit from the sale to pay it off? Or, will I need to pay capital gains on the full profit amount?
Chris, Thanks for commenting. First, we advise that you speak with a tax professional or advisor. That said, we can say that the tax exemption only occurs on your primary residence. You will likely have to pay capital gains on this investment property. -Tim Manni, HSH.com
If I sold my home of 9 years to move but did not plan to purchase another home would I face a penalty?
Tera, It's hard to say without knowing more information. I would contact a real estate attorney to discuss in detail. -Tim Manni, HSH.com
I built my house 25 years ago and have greater than $500k capital gain. I thought the 3.8% Obamacare tax surcharge is either on the excess profit over $500k or on AGI over $250k, whichever is less. Is that correct?
Purchased income rental property in 2003 in California and have never lived in it. Paid $350,000 including an $80,000 down. Took a mortgage against the primary for $125,000 in 2009. Consolidated mortgages on rental and our primary in 2011 such that there is no mortgage on the rental now but we have $350,000. on our primary. If we are able to sell our rental, say for $400,000 (it went backwards for a few years but gaining in value now) could we use the proceeds to pay off our primary mortgage without tax consequences? We own both properties jointly, in our marriage. Thank you!
We bought a home 15 years ago, we subsequently lost jobs and became re-employed but with much lower salaries. Basically a loss of $75,000 in gross income over the last 5 years. Additionally, we have had 3 loan modifications but it never did much to help except add all the past due balance and legal fees to the end of the loan and therefore increasing the debt and now my home is underwater for almost $100,000. Since we have not paid the mortgage (which includes the escrow for taxes and insurances)since December of 2014, how will this affect our tax return? I was unemployed for 5 months in 2015 and when I did secure a job it was at a loss of $20,000 gross and I claimed 4 dependents. During the time I collected unemployment I did not pay tax so now I am worried that I will end up owing for the first time in over 25 years after this most recent situation. I have made clothing, furniture and other charitable donations, used my cell phone, computer, fax and internet for about 20% towards work. We have been in a short sale situation since July.Is it better for us to itemize or take a standard deduction? Thank you in advance for any guidance you can provide.
My husband and I built our home in 2005. We had a sewer backup and lost the papers with the info and costs of building the home. He died 2 years ago and I need to sell the home. I think it will sell for about $400,000. How can I establish what we paid to build the house? My husband was the contractor. So I don't have a basis to figure captital gains on.
Lenore, Sorry to hear of your loss. This is a tough question to answer and I'm honestly not sure of the answer. If you had a mortgage, a working loan amount would be with your mortgage paperwork and you could contact your bank or mortgage lender for more info. Otherwise, the only advise I can give is to consult with a local tax professional. Thanks for commenting, Tim Manni, HSH.com
Say I purchased my home for $480,000 ten years ago and I sell it for $520,000 and I have nearly $300,000 in equity. What are my tax liabilities on the equity?
Keith, When you sell your home, the tax liability is potentially on the profit you make, not your equity stake. Here is what the IRS has to say: "If you have a gain from the sale of your main home, you may qualify to exclude up to $250,000 of that gain from your income. You may qualify to exclude up to $500,000 of that gain if you file a joint return with your spouse. Publication 523, Selling Your Home, provides rules and worksheets. Topic 409 covers general capital gain and loss information." Thanks for commenting, Tim Manni, HSH.com
I have a house since I was by myself, recently I came together with somebody and we are paying the mortgage together. Can I deduct half of the interests from my tax return and she deduct the other half from hers? I am still a sole proprietor of the house.
Ricardo, To deduct the interest you are paying on your mortgage, your name needs to be on the mortgage. Just because someone else lives in the home you own doesn't mean they can deduct the mortgage interest. Thanks for commenting, Tim Manni, HSH.com
I purchased my first home in 1999 for $105,000. It has been rented for the last 7 years, because I got married and no longer lived in it. My husband passed away this year, and I am having to sell it now; the closing will be at the end of next month. I purchased the home for $105,000.00, and the selling price is $265,000.00. However I am having to give the buyers a $7,000.00 credit towards their closing costs, which brings my selling price down to $258,000.00. Then I will have to pay the Real Estate company $12,900.00, and I want to pay off the mortgage on my current home of $174,000.00. (The home being sold has no mortgage). I am 65 years old and don't have much savings. Of the $71,100.00 left, how much capital gains tax will I have to pay?
Thank you for stopping by. This is a lot of moving parts and a time of big change for you. In order to give you the very best advice, this sounds like something a local certified public accountant is best suited to address. If you have any trouble finding one, the American Institute of Certified Public Accountants is a good guide. You can conduct a search based on your zip code.