Congratulations! You listed your Tulsa home, found yourself a buyer, and successfully navigated through escrow. Now you get to sit back and count all that money you made, right? Not so fast. First, read my home selling tip about what to do after the sale.
Home Selling Tip: What to Do After the Sale
Save & File Your Paperwork
Remember signing your life away…er, I mean signing all those closing documents until it felt like your hand was ready to go numb? If you hate clutter, you may be tempted to simply shred it all and say “good riddance”. However, you need to suppress that urge. Instead, file all of it away somewhere safe but easy to access. Why? Come tax time, you need that paperwork handy. This includes all of your closing paperwork as well as any receipts for improvements done during the 90 days before the sale as well as any other improvements done throughout the entire year. Uncle Sam allows deductions for at least some of these costs to help lower your capital gains. But you need to provide proof in case of an audit.
Set Aside Estimated Taxes
This is an extremely important home selling tip. When you sell your Tulsa home, the difference between what you initially paid and the amount of money you received from the sale is called “capital gains”. The IRS considers this income and, therefore, subject to taxes. However, Uncle Same grants a tax reprieve of up to $500,000 (for married couples filing jointly) or $250,000 (for individuals or married couples filing separately) on your capital gains (ie, capital gains exclusion). So, if you bought your home for $200,000 and sold it for $500,000, joint filers would not have to pay any taxes on the $300,000 profit from the sale. Individuals and separate filers would only owe on $50,000 of profit proceeds ($300,000 profit minus $250,000 exclusion). If you find yourself owing capital gains, make sure you set aside your estimated taxes in a separate account to withdraw when taxes are due in April.
Park Your Proceeds in a Money Market Fund
No mattress-stuffing or even home safe deposit for your tidy profit, please. Keep it secure in a money market fund. This keeps your funds safe and even earns you a little extra while you contemplate your next move.
Don’t Rush Into Your Next Home Purchase
Take your time. This may mean renting for six months, a year, or maybe even more while you seek out your next Tulsa home. Use this time to evaluate your financial situation. Talk to a lender (or two) to determine how much you can comfortably spend on a new place and avoid going “house poor” with your next purchase.
Change of Address
Another helpful home selling tip? Don’t forget to submit a change of address form when you move out of your old Tulsa home. The quickest and (probably) most convenient way to change your address is by doing so online at the USPS website. While you’re at it, update your voter registration, too.
Down Payment for Your New Home
Finally, it’s never too soon to start thinking about your down payment strategy for your next home purchase. While some mortgage loans allow for as little as 3% down, financial experts still believe 20% down is the way to go. You avoid paying PMI (private mortgage insurance), which saves you a few hundred dollars a year. Even with 10% down, you lower the amount of PMI you pay. A higher down payment lowers the amount you actually borrow. In turn, that lowers your monthly payment. If you can afford more of a down payment, though, you might want to put the extra in an emergency fund in case you need it after you move in. Ask your lender which strategy works best for you.
