When Selling My House What Taxes Do I Pay?
Selling your home is one of the most important decisions in life. Whether you want to get a bigger house because there is not enough space for your family or you decide to downsize because your current home is too big for you, selling a home is a massive undertaking. The home-selling process may be confusing, especially if you have to deal with taxes that may affect your finances. In order to assist you with selling your property, We Buy Austin Houses has prepared a guide that contains all the information about taxes you need.
Do You Need to Pay Taxes When Selling a Property?
The general answer is yes — you will have to pay taxes on the amount of money you receive from the home sale. However, there are also some major exceptions that will let you either pay less or avoid paying taxes altogether.
For example, if you have been living in a house for at least two of the last five years, the first $250,000 in profit that you receive when you sell your property is tax-free. If you are married and filing a joint tax return with your spouse, then this amount doubles to $500,000. However, it is important to remember that this amount is not the price of the home — it is your profit.
If the price of your home is $250,000 or less, and if you have been living in the house for at least two years, you do not owe taxes, and selling your home is completely tax-free.
How to Determine the Profit of Your Property Sale
In order to find out how much you can make on selling your house, the first thing you should do is figure out the cost basis for your property. You should take into consideration the total amount you spent on the mortgage, repairs, and renovations. For example, if you had to spend $20,000 to completely renovate your house, then you should add this amount to the cost basis.
The next thing you should do is subtract certain costs from the amount you sold your property for. These costs include closing costs, realtor fees, and other expenses. For example, if the price of your home was $300,000 and you spent $30,000 on the costs mentioned above, then the total amount you made would be $270,000.
Finally, you need to subtract the cost basis from the total amount you received from selling your property. If the final number you got is less than $250,000, you have no taxes to pay.
Apply for a Reduced Exclusion
If you failed to meet all of the above-mentioned requirements, you can apply for a reduced exclusion that allows you to claim a part of the tax break. Situations that generally qualify include:
- A health issue
- A divorce
- A change in employment
- The need for a bigger home because of a growing family
The amount of a reduced exclusion you are eligible to claim depends on the time you had lived in your home. For example, if you lived in your home for one year, that is half of the required time, which means that you are eligible for half of the exclusion.
Sell Your Home to Real Estate Investor
If you need to sell your house fast, one of the most effective ways to do this is to sell your property to a cash buyer or real estate investor. They are ready to pay you cash and purchase your property as-is. We Buy Austin Houses is a family-oriented business that is ready to help you. We buy homes in any condition and any location, and we do not require you to make any renovations or repairs. If you have any questions or are interested in getting a cash offer, do not hesitate to contact We Buy Austin Houses online or call us at 512-598-9341 today.