The 2020 Tulsa real estate market taught us that no home is “unsellable“. Even in the midst of a global pandemic, last year turned out to be a great time to sell. So, if you happened to have sold your Tulsa home in 2020, you may be eligible for some great tax deductions when you file this year.
Tax Deductions for Home Sellers
Expenses for Selling Your Home
Selling a home comes with certain expenses. Legal fees. Escrow fees. Advertising costs (sometimes). Commissions. Luckily, these expenses turn into tax deductions. As long as you lived in the Tulsa home for at least two of the previous five years as a primary residence, you may deduct these expenses from your capital gains. While not a direct deduction from your taxes owed, it still helps your bottom line. This deduction does not apply to investment properties.
Improvements and/or Repairs
They say that you need to spend money to make money. If your property needed some repairs and improvements to make it marketable, those may fall under the tax deduction category. But there is a timeframe involved. All of these improvements and/or repairs must have been completed within 90 days of closing on your Tulsa home sale.
Interest and Taxes
Mortgage interest and property taxes are more tax deductions available to anyone who sold their home last year. You may deduct what you paid for the year on both of these up until the final date of sale. For mortgage interest, this applies up to $750,000 of mortgage debt if your mortgage was taken out after December 15, 2017. If your mortgage is dated before then, you may deduct all mortgage interest paid for the year up to $1,000,000 of mortgage debt. Property taxes cap out at $10,000.
Capital Gains Tax Exclusion
Finally, what about capital gains? When you sell your home, the difference between what you initially paid for it and what you sell it for is called “capital gains”. Uncle Sam considers this income. Therefore, it is taxable. However, individuals may exclude up to the first $250,000 of profit from taxes. For married couples, that exclusion goes up to $500,000. While not considered “tax deductions”, the capital gains tax exclusion means you get to keep $250,000/$500,000 tax-free. That certainly helps at tax time.
I am not a tax professional. Use this blog post as a guide. Always, always consult with your tax advisor/preparer about any of these deductions before officially filing. Write down any questions you may have before you go see your advisor. Remember, the deadline to file income taxes for the 2020 tax year is April 15th, 2021.
Lori Cain, REALTOR®, Serving Midtown and the greater Tulsa, OK area. Call 918-852-5036.
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