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What Taxes Do I Pay When Selling My House?
Taxes can be extremely complicated, especially when selling a house. You absolutely need to factor in taxes when selling a property, but you might be surprised to learn that you don’t have to pay as much as you think. Here’s what you need to know about your taxes when selling a house.
Real Estate Taxes
Property taxes have to be paid at the sale of the property. If you usually accrue your taxes to the end of the year, be aware that those taxes are going to have to be paid when funds go through escrow. You’re going to have to pay them so that the title can be transferred. Otherwise there will be an open debt on the property. You can attempt to get the purchaser to pay them, but usually it’s the seller who pays property taxes.
You can check your property tax amounts with your local county assessor. However, if you have a mortgage on your home, it’s very likely that your property taxes are already being paid by your mortgage company. You’ll want to check with them to learn about anything that they’re holding in escrow because that might affect the amount you need to pay. A title company will often do this legwork for you.
Income and Capital Gains Taxes
If you’re selling your own residential home, there’s an exemption of up to $250,000 in gains. That’s gains, not the total price. So, let’s say you purchase your house for $300,000 and sell it for $450,000. Your capital gains were only $150,000, so you’re exempt. That exemption goes up to $500,000 if you’re selling the house with your spouse. Chances are you’re not going to have to pay income or capital gains taxes.
There’s also something called a like-kind exchange where you can sell one property for another property of equal or greater value without paying taxes. For instance, you can exchange a rental property for another rental property. This is a more complicated exchange and something that you should think about with the help of a tax attorney. If you’re selling a property that you’ve been using as a rental or investment property, you are likely going to have to pay capital gains tax. Capital gains tax is not set at the same rate as income tax, but it can still be substantial, and you’ll have to pay it in both your state and federal returns.
Other Costs Associated With Selling a Home
While you likely don’t need to worry about taxes very much, you should still consider that there will be other costs associated with selling your property. These costs can include listing agent fees, realtor fees, maintenance and repairs, and more. The easiest way to address this is to sell with a cash buyer.
The fees associated with selling a home can easily exceed $10,000 or more because realtor fees are usually a percentage of the sale. But when you go with a cash buyer, you get a cash offer directly from the cash-buying company. You don’t need to engage with a real estate professional, and you don’t have to pay those fees. There are no hidden charges, and the amount your receive is clear upfront.
Further, when you sell to a home-buying company, you don’t need to pay for repairs or maintenance. A home-buying company purchases homes as is, even if a home is old, ugly, or otherwise in need of repair.
If you’re thinking about selling your home, the time to act is now. Contact We Buy Waco Houses today to find out more about what we can do for you. Call us at 254-272-3743 or fill out our quick online form.
