Thinking about selling your home in Tampa? Before you pop the champagne, let’s talk about tax deductions when selling a home. The IRS might not be everyone’s favorite, but knowing what deductions are available can save you a chunk of change when tax season rolls around—especially for Florida homeowners!
Whether you’re wondering if you can deduct realtor fees, what expenses qualify, or how to make the most of Florida-specific benefits, I’ve got some practice advice I’ve learned over the years (with the legal disclaimer to consult your tax consultant for the final say). Let’s dive in!
Understanding Tax Deductions for Home Sellers
As a home seller in Florida, it’s essential to understand the tax deductions available to you. Tax deductions can significantly reduce your taxable income, which in turn can lower your tax liability. When you sell your home, several costs associated with the sale can be deducted, helping you keep more money in your pocket.
For instance, selling expenses like realtor commissions, home improvements, and marketing costs can all be deducted. These deductions reduce what’s called capital gains, which is the profit you make from selling your home. By lowering your capital gains, you reduce the amount of tax you owe.
Additionally, if you’ve made any major capital improvements to your home, you can add these costs to your home’s cost basis. This adjustment further reduces your taxable gain, making it a smart move to keep track of all your home improvement receipts.
Understanding these deductions and how they impact your taxable income is crucial. And as I mentioned, it’s always a good idea to confirm with a tax professional to ensure you’re maximizing your deductions and complying with all tax laws.
What’s New for Filing Taxes?
Here’s a quick look at recent tax changes (since 2024) that might impact home sellers for the upcoming year.
Capital Gains Thresholds
The federal capital gains exclusion for selling a primary residence remains at $250,000 for single filers and $500,000 for married couples filing jointly. For married couples filing jointly, the capital gains exclusion remains at $500,000, provided both spouses meet the ownership and residence requirements. However, keep in mind that the IRS periodically adjusts income tax brackets for inflation.
A note on the Expatriate Tax: Be aware that if you are subject to expatriate tax, you may not qualify for certain tax benefits when selling your home.
Energy-Efficient Upgrades
If you installed solar panels or other energy-efficient systems before selling, you might qualify for federal tax credits. It’s worth checking out!
Increased Standard Deduction
The standard deduction increased this past year in 2024, which could impact how beneficial itemizing deductions is for you. Always consult with a tax professional to weigh your options.
What Can You Write Off When Selling a House?
Selling a home is a major transaction, but here’s the good news: you may be able to write off several costs that help reduce your taxable gain. If your home qualifies as your principal residence, you may be eligible for a capital gains tax exclusion, which can significantly reduce your taxable gain.
Here are the key deductions to keep in mind for filing:
Realtor Commissions
Yes, that commission you paid your hardworking real estate agent (me!) is deductible. It’s considered part of the “selling costs” and reduces your capital gains.
Realtor fees are one of the largest deductions sellers can take, directly reducing your capital gain. Since these fees are directly tied to the sale of your home, they’re classified as a selling expense. That means they’re subtracted from your home’s sale price to calculate your taxable gain.
It’s a win-win—you sell your house with professional help, and you keep more money in your pocket when tax season rolls around.
Home Improvements and Repairs
If you made repairs or upgrades to get your home ready for sale, those expenses may be deductible. Think painting, landscaping, or fixing that leaky faucet.
Marketing Costs
Expenses like professional photography, staging, or listing fees can also be deducted. Selling a home isn’t just about curb appeal—it’s about knowing what counts as a tax write-off!
Closing Costs
Some closing costs, like title insurance, escrow fees, or legal expenses, can be deducted. Closing costs can range from 2-5% of the property sale price, and some of these costs may be deductible on your income tax return. Knowing which costs you can deduct can make a significant difference in your tax bill.
Some of the closing costs that may be deductible include:
- Title Insurance: This protects both the buyer and the lender from any disputes over property ownership.
- Escrow Fees: These are fees paid to the escrow company for handling the closing process.
- Legal Fees: If you hired an attorney to help with the sale, those fees might be deductible.
To claim these deductions, you’ll need to itemize them on your income tax return. Keep detailed records of all your closing costs and consult with a tax professional to ensure you’re claiming everything you’re entitled to.
Property Taxes and Transfer Taxes
As a home seller in Florida, you’ll need to consider property taxes and transfer taxes when selling your home. These taxes can impact your overall profit from the sale, so it’s important to understand how they work.
Property Taxes
Property taxes are taxes levied on real estate by local governments. In Florida, property taxes are paid in arrears, meaning they are paid at the end of the year. As a home seller, you’ll be responsible for paying property taxes up to the date of the sale. If you’ve already paid property taxes for the year, you may be eligible for a prorated refund.
For example, if you sell your home halfway through the year, you might get a refund for the property taxes you paid for the remaining months. This can be a nice little bonus to help offset other selling expenses.
Transfer Taxes (Documentary Stamp Tax)
Transfer taxes, also known as documentary stamp taxes, are taxes levied on the transfer of real estate. In Florida, the transfer tax rate is $0.70 per $100 of the sale price, with the exception of Miami-Dade County, where the rate is $0.60 per $100. As a home seller, you’ll typically be responsible for paying the transfer tax. Understanding these taxes and how they affect your sale can help you plan better and ensure you’re not caught off guard by unexpected costs.
Mortgage Interest
If you’re still paying off a mortgage, the interest you paid prior to the sale may be deductible.
Capital Improvements
Major projects like replacing your roof, adding a pool, or installing energy-efficient windows can be added to your home’s cost basis. This reduces your taxable gain.
Mortgage Debt
If any portion of your mortgage debt is forgiven, it may need to be reported as ordinary income on your tax return.
Florida-Specific Tax Benefits for Principal Residence Sellers
Living in the Sunshine State has its perks—no state income tax is a big one! But beyond that, Florida offers specific tax benefits for homeowners.
Here’s how to take advantage:
- Homestead Exemption Portability: If you’ve sold a primary residence in Florida, you may be eligible to transfer a portion of your homestead exemption to your next property. This can save you big on property taxes.
- No State Capital Gains Tax: Florida doesn’t tax capital gains, so your only concern is federal taxes. That’s a big win for sellers!
- Senior and Veteran Property Tax Benefits: If you’re a senior or veteran, Florida offers additional tax exemptions you may be able to leverage. Check with your local tax assessor for details.
Don’t Miss Out on Your Deductions—Call Me Today to Get Your House on the Market!
Selling a home can feel overwhelming, but it’s also a huge opportunity to maximize your profits by understanding what’s deductible. Whether it’s realtor fees, closing costs, or Florida-specific perks like the homestead exemption, every bit adds up.
If you’re ready to sell or just want advice on how to prep your home, I’m here to help! Let’s make selling your Tampa home as smooth—and profitable—as possible. And don’t hesitate to give me a buzz for expert tips and personalized guidance as your go-to resource for Tampa real estate. Let’s sell smarter together!