2023 housing market
Selling your home can be a significant financial decision, and it's important to understand the tax implications that come with it. If you're thinking about selling your home in 2023, it's important to start planning now to avoid any unexpected tax liabilities. In this article, we'll discuss what homeowners need to know about taxes when selling their home in 2023.
First, let's talk about what taxes you may be subject to when selling your home. Under current tax laws, homeowners can exclude up to $250,000 ($500,000 for married couples filing jointly) of capital gains from the sale of their primary residence if they have owned and lived in the home for at least two of the past five years. This exclusion applies to gains from the sale of a primary residence, not investment properties.
It's important to note that any gain recognized in 2023 won't be reportable or taxable until 2024. However, it's still important to figure out your basis and adjustments now. This includes gathering up receipts for any improvements or repairs made to your home over the years. These expenses can be added to your home's basis, which will reduce your overall capital gain when you sell. By doing this work now, you'll save yourself a headache next tax season.
Teri Pacitto, Broker with The Pacitto Group and Avant One Real Estate in Thousand Oaks, advises that homeowners always discuss any tax situation with their tax advisor or attorney. They can provide guidance on how to best structure the sale of your home to minimize your tax liability.
Another important factor to consider is the length of time you've owned your home. If you've owned your home for less than two years, you may not be eligible for the capital gains exclusion. In this case, you'll need to pay taxes on any capital gains you realize from the sale of your home.
Additionally, if you've used your home for both personal and business purposes, you may be subject to a partial exclusion. This is common for those who operate a home-based business or rent out a portion of their home. In these cases, it's important to work with a tax professional to ensure you're correctly calculating your tax liability.
In conclusion, if you're thinking about selling your home in 2023, it's important to start planning now. Understanding your basis and adjustments, as well as discussing any tax situations with your tax advisor or attorney, can help minimize your tax liability and make the selling process smoother. Remember, selling your home is a significant financial decision, and it's important to take the time to understand the tax implications that come with it.
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