What Taxes Do I Pay When Selling My House?
Selling a home can be a challenging task for any homeowner, especially if they have never sold properties before. There are many challenging and confusing aspects involved in the home-selling process, and one of them is taxes. Many homeowners do not know enough about taxes, do not understand what taxes they have to pay when they are selling their properties, and do not know what impact these taxes have on their finances. For this reason, in this article, we prepared the most essential and basic information about taxes that every homeowner should know.
Are There Any Taxes That You Have to Pay When Selling a Home?
Yes, there are taxes that every homeowner has to pay on the amount they receive after selling their property. The good news is that there are certain exceptions that allow you to either reduce the amount of taxes to pay or eliminate them completely.
For example, if you have lived in your house for at least two years, and now you are selling it, the first $250,000 you receive from the sale is tax free. If you are married and are filing a joint tax return with your spouse, the tax-free amount is $500,000.
If you have lived in your house for less than two years, and the price of your home is less than $250,000, then you do not have to pay any taxes, which means that the home-selling process is tax free for you.
Is There a Way to Figure Out the Profit You’ll Get From Selling Your Property?
Finding out the actual profit is possible, but it requires conducting certain calculations. The very first step is to find out the price of your property. This might seem to be easy, but there are certain factors you need to take into consideration. These factors include the price you paid for your home, all the repairs and upgrades you have completed and spent money on, and some others. For example, if you renovated the kitchen and spent $10,000, you should add this amount to the actual price of your property.
The next thing you need to do is subtract expenses such as closing costs, realtor fees, and others from the amount you bought your home for. For example, if the price of your home was $300,000, and you spent $70,000 on realtor and closing fees, then the actual price of your home is $230,000.
Finally, you need to subtract the cost basis from the amount you received from selling your property. If the final amount is lower than $250,000, then you do not have to pay any taxes.
There Is Another Option — A Reduced Exclusion
If you do not meet the requirements described above, there is another option you should consider — a reduced exclusion. This option is for homeowners who do not meet the abovementioned requirements due to unforeseen personal and family circumstances, illnesses and other health issues, change of job, or other circumstances. If you are not sure whether a reduced exclusion option works for you, you should talk to a tax professional, who will assess your personal situation and provide you with the information you need on your specific case.
Save Money on Selling Your Home — Sell It to a Cash Home Buyer
There is one method that allows you to save money on the home-selling process by making it less expensive. This method is selling your property to a cash buyer. It is one of the easiest and most affordable ways to sell your house fast that allows you to avoid the realtor fees and closing fees, which can be thousands of dollars. Cash buyers purchase different types of homes regardless of their location, condition, age, and other characteristics.
If you are looking for a reliable and trustworthy cash home buyer in Houston, TX, or any other nearby town in Texas, do not hesitate to contact Terra Home Solutions. We buy houses as is, meaning that you do not have to spend money on any repairs, and we pay you cash. If you have any questions about the home-selling process, or you want to know more about our company, feel free to contact us.