How Selling a Home in Colorado Can Impact Your Taxes
When you’re selling a home, there are a lot of items that you have to take into consideration. Picking how you will sell your home, prepping your home for market, and filing the right paperwork. None of that even includes packing up your home and coordinating your move to your next house.
One part that can slip people’s minds as they’re getting ready to move is looking at how your move can impact your taxes.
How Much of the Profit from Your Home Sale Can Be Tax-Free?
If you sell your home at the right time, the profit you make off of the home could be tax exempt. For a single tax return, up to $250,000 of the profit from the sale would be tax-free. If you’re married, that number jumps to $500,000 when you file jointly.
When’s the Best Time to Sell a Home for Tax Purposes?
To qualify for this tax exemption, you’ll have to have owned your home and lived in it for two of the last five years before the sale. So, if you’ve lived in your home for seven years, then rented it out for two, and now you’ve decided to sell, you should still be eligible for the tax exemption.
How Many Times Can You Use This Tax Exemption?
There’s no limit! You can use this tax exemption every time you move and have lived in a home for two of the last five years. If you use your exclusion on a home, you have to wait two years before you can use it again. Per the rules of the exclusion though, you’d have to wait this length of time to qualify anyways.
Important Documents to Have
When you buy a home, it is important to hold onto the Closing Disclosure Form, which documents the fees, closing costs, and mortgage rate when you first purchased the home. This is because when you sell your house, it can affect how much gain or loss is calculated when reporting the sale of the property.
Another document you’ll want to be familiar with is the 1099-S form, which is used to ensure that the sale is accurately recorded for tax purposes.
One other thing to remember is to keep your receipts! If you make any improvements to your home, this can increase your property value, which is important to record and to have proof of when filing for taxes.
We’re Here for You!
If you need help sorting through your tax paperwork for selling a home, you may want to speak to a qualified tax professional. You can also call ClearSale at 303-900-0344 today! We are happy to help and want you to be able to sell your home fast so that you can move on with life.