How an Increased Tax Basis can be Helpful for Parkland Home Sellers
More and more reports show that Parkland homes have grown rapidly in their fair market value, and many homeowners that have owned a home for some time have built a large amount of equity. Some Parkland homeowners are concerned about what this might mean for their tax responsibilities if they do sell their homes.
An Explanation of Tax Basis
When considering a sale of your home and what your tax responsibility might be after selling, it is good to look at your home's tax basis. The tax basis of a primary home (one you live in full time) is the cost you paid to purchase your home plus any capital improvements you may have made since owning it. The number reduces for certain items as well.
Why Tax Basis Matters
It is helpful because a majority of home ownership costs aside from mortgage interest and taxes cannot be deducted from your tax return. But where they are helpful is in increasing the tax basis of a home.
How Higher Tax Basis is Beneficial to Home Sellers
When a Parkland homeowner decides to sell their home, it can save them some tax dollars when they have an increased basis. Currently, the law allows up to $250,000 of profit from a home sale, and up to $500,000 for couples filing jointly can be excluded from having to pay capital gains tax on a home sale.
Some homes will easily fall into this exemption of paying taxes, but as values continue to appreciate, especially in luxury housing areas, the tax basis of the home becomes important. The higher the tax basis the smaller the amount of taxes owed.
It is a good idea to have a well-kept record of anything that could qualify you to increase your tax basis if you expect to profit more than the exempted amount on the sale of your Parkland home. If you feel you may be subject to capital gains taxes it is a good idea to ask for the expertise of a tax professional.
For help with successfully selling your Parkland home please contact us any time.