How to sidestep a tax bomb when selling your home
With soaring prices and record home equity, you may expect a profit when selling property.
However, you may owe capital gains taxes if the windfall exceeds $250,000 for single sellers or $500,000 for married couples filing together.
You can reduce your bill by adding certain home improvements to the original purchase price, experts say.
With soaring prices and record home equity, you may expect a profit from selling your property. But the windfall may trigger an unexpected tax bill next April.
While home profits dipped slightly, the typical single-family seller still scored a $103,000 gross profit during the first quarter of 2022, according to ATTOM, a nationwide property database.
Although many skirt taxes with profits under the capital gains thresholds, others — especially long-time homeowners — may have a costly surprise, experts say.
More from Personal Finance: Inflation is the ‘top problem’ facing America, survey shows Nearly 40% of investors who pulled money out of markets in the last year regret it Here’s how young women are deciding how much to save for retirement
Home sales profits are considered capital gains, levied at federal rates of 0%, 15% or 20% in 2022, depending on taxable income.
Capital gains tax rates for 2022
Long-term capital gains rate Taxable income
0% $0 to $41,675
15% $41,676 to $459,750
20% $459,751 or more
Married filing jointly
0% $0 to $83,350
15% $83,351 to $517,200
20% $517,201 or more