It’s that time of year again… yup, tax season is upon us! If you have or if you are planning to sell your New Jersey house in], then this is definitely the article for you! We are going to go over our special Tax Tips To Sell Your New Jersey House. Please note that the purpose of this article is to inform! We strongly suggest seeking the help of a real estate tax professional to get help with your particular situation.
Tax Tips To Sell Your New Jersey House
If you have specific questions, it is always best to ask the IRS directly!
Not All Profits Are Taxable
As long as you meet a few different criteria, then you don’t have to pay taxes on a high portion of your profits. Under most situations, you can exclude up to the first $250,000 for single person tax returns, and up to the first $500,000 if you file a joint tax return. Do keep in mind that if you end up selling for a loss, you can’t make a deduction for that amount.
Now this deduction only applies to people who are selling their primary residence, and may only be utilized once every two years. Further, in order to qualify for this deduction, you need to have lived in that home for a minimum of two of the past five years.
It’s also important to update your address with the IRS each time that you move.
More Exclusions
If the home is a rental property and you can’t meet the above requirements, you may yet be able to exclude a certain portion of thee profits out of your income taxes. If you meet some of the IRS’ special conditions then you might qualify for a prorated, tax-free gain. Some special conditions would include a change in your health, a change in employment or other unfortunate circumstances. It’s a good rule of thumb to say that if you have seem a substantial change in your income, you might qualify for assistance from the IRS to keep a portion tax free. Make sure that you are exploring all your options for Tax Tips To Sell Your New Jersey House
Reporting the Sale
You’ll be required to report the sale of your house if you receive a 1099-S form from your closing agent. The purpose of this form is to provide the IRS with pertinent information regarding the proceeds of the transactions. In order to avoid reporting, ensure that there weren’t any profits in the transaction. If that is the case, then before closing you can let your agent know that the form doesn’t need to be issued. Make sure that this done because even if there wasn’t any profits involved, if the 1099-S form is issued, you’ll still be required to file with the IRS… even when there wasn’t any money owed.
Taxes for Capital Gains
If the property you’re selling an investment property or a house that you only owned briefly, it’s likely that you’ll still be subject to capital gains. They are completely dependent on which tax bracket you are in ie., how much you make. If you’re in a lower tax bracket, there is a higher chance that you won’t have to pay any capital gains. For those in the higher tax brackets, that means you may have to pay upwards of 20%. Even if you only owned the house for a short time, those sorts of assets will typically be taxed at the same rates as ordinary income.
Credits For First-Time Homebuyers
It does depend upon the dates that you purchased and sold your house, but you received a first time home buyer credit and then moved quickly after then you may be required to pay back all or a portion of that supplement that you received. Usually, the rule of thumb is if you move within three years of buying the house, the credit needs to be paid back through the sale of the house. Special rules might apply for different situations, you can learn more about that through Publication 523 from the IRS.
You Can Deduct Your Sales Costs
Good news! When selling your New Jersey house, the IRS allows you to deduct any reasonable expense you incurred in order to successfully sell your house. That includes escrow fees, improvements that were made, any assessments, advertising costs, agent fees etc. It’s important to keep a ledger of each dollar you spend in the pursuit of selling your property. Once tax time rolls around the corner, this will certainly amount to major deductions!
No matter the time of year you decide to sell, it’s always the best idea to find guidance from a real estate tax professional and ask a host of questions. You can also consult with your real estate agent, accountant, or attorney to make sure you are following a plan that is designed specifically for you in mind.
