Taxpayer asks:
I sold a primary residence last yr and bought a new one. I did not gross over $250,000 on the sale of the house. What figures should I pay attention to for reporting purposes from the closing sheets? I presume that any taxes paid out prior to the sale of the house are on my mortgage papers. How about commission or any special line items on the closing sheet for the purchase of the new house?
Taxgirl says:
First of all, I don’t believe for a moment that real estate sales are slowing down in most parts of the country, despite what is being reported on the news. I have received a number of questions about buying and selling homes – from my inbox, I’d say the markets are still hot!
That said, here is your answer: You generally cannot deduct expenses related to the sale or purchase of a residential property for income tax purposes.
You already seem to be aware of the capital gains exclusion for the sale of a personal residence. That exclusion is $250,000 for single persons and $500,000 for a married couple filing jointly and relates to the sale of a primary personal residence (no rentals or vacation properties) owned by you for two of the last five years; there is an exception to this rule for certain changes in your place of employment, health or other unforeseen circumstances. If you qualify under an exception, your exclusion amount is pro-rated. Military personnel who are required to move for service are exempt from the two year rule.
If you have special circumstances, be aware that there may also be adjustments depending on deductions claimed over the years, such as the home office deduction.
Real estate taxes paid, points paid, or other interest expenses that would ordinarily be deductible on your Schedule A continue to be deductible. Most likely, your bank, escrow agent or other advisor will report these expenses on a form 1098. If you don’t receive this information, you should be able to find it on your HUD sheet.
Enjoy your new home!
Before you go: be sure to read my disclaimer. Remember, I’m a lawyer and we love disclaimers.
If you have a question, here’s how to Ask The Taxgirl.
