If you have owned your home for some time, it is quite possible that you can sell your home for a profit. If you can accomplish that, then you also want to make sure that you minimize your tax liability.
With real estate prices declining over the past few years, selling your home for a gain may sound improbable. But if you have owned your home for some time, it is quite possible that you can sell your home for a profit. If you can accomplish that, then you also want to make sure that you minimize your tax liability.
In order to see tax savings, you want to report the lowest capital gains that you can so that you are taxed on the smallest amount of money possible. When selling your home, the idea is to get the cost basis as high as possible, so that it will be as close to the sales price as possible.
But how do you increase your cost basis?
In the years before selling your home, you want to keep track of any major improvements that you've done to your home. The expenses for these improvements can be added to the cost basis for your home.
Expenses that improve the value of your home, such as landscaping, a new deck, or a furnace may be added to your home’s cost basis. Your tax savings can really start to add up if you have a folder full of receipts to verify your expenses.
So save those receipts. If you haven’t in the past, now is the right time to start.
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The information provided here is intended to help you understand the general issues and is not intended to constitute any tax, investment, or legal advice or to substitute for obtaining tax, investment, or legal advice. Consult your financial, tax, or legal advisor regarding your own unique situation.