SUPPORT THIS INDEPENDENT JOURNALISM
The article you’re about to read is from our reporters doing their important work — investigating, researching, and writing their stories. We want to provide informative and inspirational stories that connect you to the people, issues and opportunities within our community. Journalism requires lots of resources. Today, our business model has been interrupted by the pandemic; the vast majority of our advertisers’ businesses have been impacted. That’s why the SC Times is now turning to you for financial support. Learn more about our new Insider’s program here. Thank you.
By Scott Kidd
Take advantage of the capital-gains exemption.
Thinking of selling your home, perhaps to downsize, move closer to family, or retire to that vacation spot you’ve always loved? Once you’ve sold it, you can avoid paying 2018 federal taxes on the profits by using the capital-gains exemption.
This is a nice bonus if you sell your principal residence after living in it two out of the last five years. It lets you make up to $250,000 in non-taxable profit if you’re a single owner, and $500,000 if you’re married. These proceeds don’t have to be reinvested into real estate and there’s no limit on the number of times this exemption can be used. For any profits that exceed the ceiling for your filing status, you will typically pay the capital gains tax rate, generally 0, 15, or 20 percent depending on your tax bracket as of 2018.
Don’t forget to itemize at tax time.
For most people, home improvements–even major ones–won’t help their tax situation until after the home is sold. Nevertheless, keep track of what you paid in home improvements over the years for potential tax savings and to help justify your selling price.
If you’ve held on to your receipts and know where to access them, itemizing can be a breeze, especially if you’re using a program like TurboTax, which will walk you through the entire process.
The following items are usually eligible for a tax deduction:
- Annual property taxes you paid on the home, such as county or city taxes.
- Deduction on interest for qualifying mortgages up to $750,000 ($375,000 if married/filing separately); homes under agreement before 12/15/17 for purchase prior to 1/1/18 (provided purchase occurs by 4/1/18) grandfathered under previous $1,000,000 ($500,000 if married/filing separately) limits.
- Interest on home equity lines of credit (HELOC) deductible in certain cases where proceeds are utilized to acquire or improve a property.
- Loan fees you paid when you bought the house, or any you convinced the seller to pay for you.
- Home improvements required for medical care.
If you have questions about the capital-gains exemption or deductions, consult with a tax professional.
Scott Kidd, a real estate agent in the Coastal Orange County market for over 30 years, is known for his intuition and easygoing demeanor. Scott is well-versed in real estate law, negotiations and client confidentiality. Scott is based in the San Clemente office of Berkshire Hathaway Home Services California Properties. 949-498-0487, firstname.lastname@example.org, www.ScottKidd.net. Lic#: 01011063.