When you sell a stock, you owe taxes on the difference between what you paid for the stock and how much you got for the sale. The same holds true in home sales, but there are other considerations.
How to Calculate Gain
| Your home’s original sales price when you bought it (not what you brought to closing). | |
| Additional costs you paid toward the original purchase (include transfer fees, attorney fees, and inspections but not points you paid on your mortgage). | + |
| Cost of improvements you’ve made (include room additions, deck, etc. Improvements do not include repairing or replacing existing items). | + |
| Current selling costs (include inspections, attorney fees, real estate commission, and money you spent to fix up your home to prepare it for sale). | + |
| Add the above items to get your adjusted cost basis: | = |
| The final sale amount for your home. | |
| The adjusted cost basis figure from above. | – |
| Your capital gain: | = |
A Special Real Estate Exemption for Capital Gains
Up to $250,000 in capital gains ($500,000 for a married couple) on the home sale is exempt from taxation if you meet the following criteria: (1) You owned and lived in the home as your principal residence for two out of the last five years; and (2) you have not sold or exchanged another home during the two years preceding the sale. You may qualify for a reduced exclusion if you otherwise qualify but are short of the two-out-of-the-last-five-years requirement if you meet what the tax law calls “unforeseen circumstances,” such as job loss, divorce, or family medical emergency.
Source: National Association of REALTORS®
It’s guaranteed to be hectic right before closing, but you should always make time for a final walk-through. Your goal is to make sure that your home is in the same condition you expected it would be. Ideally, the sellers already have moved out. This is your last chance to check that appliances are in working condition and that agreed-upon repairs have been made. Here’s a detailed list of what not to overlook for on your final walk-through.
Make sure that:
- Repairs you’ve requested have been made. Obtain copies of paid bills and warranties.
- There are no major changes to the property since you last viewed it.
- All items that were included in the sale price — draperies, lighting fixtures, etc. — are still there.
- Screens and storm windows are in place or stored.
- All appliances are operating, such as the dishwasher, washer and dryer, oven, etc.
- Intercom, doorbell, and alarm are operational.
- Hot water heater is working.
- No plants or shrubs have been removed from the yard.
- Heating and air conditioning system is working
- Garage door opener and other remotes are available.
- Instruction books and warranties on appliances and fixtures are available.
- All personal items of the sellers and all debris have been removed. Check the basement, attic, and every room, closet, and crawlspace.
Source: National Association of REALTORS®
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- Ensure there are no gaps in insulation or crawl spaces that expose pipes to cold air, which could put the pipes at risk of freezing and bursting.
- Have your heating system checked by a licensed technician before cold weather requires daily use.
- Block drafts around doors, windows and baseboards with weather stripping, window film and caulk to control heat loss.
- Install storm doors and windows to improve energy-efficiency and get rid of drafts.
- Have chimneys cleaned by an experienced chimney sweep to prevent the risk of a fire from buildup or blockages.
- Spray door locks with powdered-graphite lubricant to prevent freezing and sticking.
- Set ceiling fans to rotate clockwise to force rising warm air back towards the floor.
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