Tying a bow on a few loose ends.
By now you may be asking yourself, "What, isn't this over yet?" Almost. As a seller, here are some important post-closing "keepers":
• Keep copies of all closing documents (for tax purposes)
• Keep all your receipts for home improvements on the house you just sold (again, for Uncle Sam)
• Keep current on real estate tax laws - your real estate attorney can be helpful in keeping you apprised of changes that may affect you
Filing taxes on your home sale.
The next time you file your annual income taxes, be prepared to fill out Form 2119, titled "Sale of Your Home." Completing this form involves figuring your "gain on sale," or "capital gain"—in other words, your profit on the sale.
To figure out your profit, first add these numbers:
• Amount you originally paid for the home
• Costs of selling your home (real estate agent commissions, title and escrow fees, buyer's loan fees, etc., but not your mortgage loan balance!)
• Amount you spent on home improvements
Now you have your "cost basis." Subtract that from the sale price of your home and you have your "gain on sale."
Your big tax break.
The beautiful thing about selling your home is the tax-free profit you can earn if you lived in your home for at least two of the past five years. If you're married, you can make up to $500,000 in profit on the sale of your home and pay no federal income tax! (Singles can earn up to $250,000 with no tax penalty.) And you can continue to buy and sell homes every two years as long as you live, and continue to reap the tax-free profits.
Good luck, and thanks for visiting!
No matter which side of the table buyers and sellers are sitting on, you're really just mirror images of each other. You go through the same process, but just have different roles and responsibilities. If you're a seller, chances are you'll be a buyer, too, and vice versa. Now that you know the ins and outs of selling a home, you should feel a lot more confident about the whole process. Stop by any time for a refresher course, and check out our Buyer Overview for everything you need to know about buying a home.
