Tax savings for selling a home
If you’re selling your home, you’re likely making a big gain—and some of that could be taxed. Lisa Greene-Lewis, TurboTax expert and CPA, discusses how to whittle it down.
Transcript
00:00 (upbeat music)
00:02 - Well, the real estate market's on fire these days.
00:05 People are buying and selling homes
00:07 and making tons of money.
00:09 So how do you save on your tax return
00:11 when it comes time to file?
00:13 Lisa Green Lewis, TurboTax expert and CPA
00:15 is here with us right now.
00:17 People are making some pretty serious gains out there.
00:19 I can't say I'm one of them,
00:21 but they're going to have to do something
00:24 with this gain come tax time.
00:25 What do they need to know?
00:28 - Yeah, so if you sell your principal residence
00:32 where you live,
00:33 you're able to get an exclusion of your gain up to $250,000
00:38 if you're single, 500,000 married filing jointly.
00:44 Like you said, Tracy,
00:45 there have been some huge gains out there.
00:47 So you want to lower that gain as much as possible.
00:52 And when you sell,
00:54 you want to make sure that you include anything
00:57 that you've done to upgrade your home into your cost basis.
01:01 Like if you bought a home and you built a pool in your yard
01:06 or did a bunch of landscaping or did an add on in your home,
01:13 you want to make sure you add that in your cost basis
01:17 to lower the gain so that you can get
01:19 that $250,000 exclusion if you're single
01:23 or 500,000 married filing jointly.
01:26 - Right, so those are the sweet spots, right?
01:27 So if your gain is God bless 750,000 and you're married,
01:32 you want to try really hard to go find the improvements
01:34 you've made to bring that down,
01:37 basically increase your original cost of the home.
01:40 But people should know, right?
01:42 Just because you put a coat of paint on the walls,
01:44 that doesn't count.
01:45 It has to be like the big things, right?
01:47 - Right, it has to be something
01:51 that is like a permanent structure on your home.
01:56 That, like you said, it can't be just like repairs
02:00 or painting upgrades.
02:02 If you use TurboTax, TurboTax will walk you through
02:07 reporting your sales transactions
02:09 and it'll also walk you through
02:11 what you can include in your cost basis
02:14 so you maximize your savings.
02:15 - Right, so siding, windows, roof,
02:18 all those things, add them up.
02:19 And then the other thing too people always ask is,
02:22 do I have two years to roll my gain into the next home?
02:25 That's long gone, isn't it?
02:27 - Yes, that's gone.
02:29 And one thing to also remember,
02:32 you have to be in your home at least two of the five years
02:37 that you own your home in order to get this gain exclusion.
02:42 - Right, and that's really important too.
02:43 So if you bought a home and sold it a year later,
02:45 you're out.
02:47 - Yes, that would mean that you can't exclude the gain
02:50 if you weren't in your home two of the five years.
02:54 - And just so people know,
02:55 what is the tax rate that gain,
02:59 'cause it'll have to be put on your tax return.
03:02 Is it their individual tax rate that applies to that gain
03:05 or is it the capital gains rate?
03:07 - It will be the capital gains rate,
03:10 which typically is lower than your individual rates.
03:13 So that could be from 0%, 15% or 20%.
03:18 - Yeah, so this is really important.
03:23 So, we're a little over mid-year,
03:26 start gathering those documents that you know,
03:29 or if you were planning on doing work to your home
03:31 before the end of the year,
03:33 keep all those receipts so that you have proof
03:35 when you file your return in April.
03:37 Lisa Green Lewis, TurboTax expert,
03:38 thank you for all of that.
03:40 - Thank you for having me.
03:42 (upbeat music)
03:44 (upbeat music)