If you’re selling your home, you probably want to move on quickly and begin your next chapter in your new house. However, you might need to consider potential tax implications. If you’ve made a profit from selling your home, you could be liable for capital gains taxes. Understanding the relevant tax rules can help you reduce your tax burden. Let’s examine the tax implications of selling your home in Fort Worth, Texas.

The Likelihood of Paying Taxes on the Sale of Your Home 

If your home has appreciated significantly, as is often the case, you could receive a substantial payout from selling it in Fort Worth, Texas. However, you will likely owe the IRS money on the profits from the sale, as your home is considered an asset and is subject to capital gains taxes.

“The primary concern at tax time for someone who has recently sold a home is whether they’ll need to pay federal capital gains taxes on the profit. Simply put, capital gains are the profits earned from selling capital assets – such as homes, cars, investments, and other valuable items.”

Additionally, with home prices rising sharply between 2020 and 2022, your home likely experienced significant capital gains. Therefore, it’s quite probable that you will need to pay taxes when selling your home.

How Capital Gains Taxes Work

Now, let’s look at how capital gains taxes work and how they apply when selling your home. 

If your home has appreciated significantly, as is often the case, you could receive a substantial payout from selling it in Fort Worth, Texas. However, you will likely owe the IRS money on the profits from the sale, as your home is considered an asset and is subject to capital gains taxes.

“The primary concern at tax time for someone who has recently sold a home is whether they’ll need to pay federal capital gains taxes on the profit. Simply put, capital gains are the profits earned from selling capital assets – such as homes, cars, investments, and other valuable items.”

Additionally, with home prices rising sharply between 2020 and 2022, your home likely experienced significant capital gains. Therefore, it’s quite probable that you will need to pay taxes when selling your home.

How to Avoid Capital Gains Tax

When selling your home, you might be liable for capital gains taxes. However, the IRS offers specific exclusions that you may be eligible for as a seller.

Industry experts note that, “[i]f you fulfill certain criteria, you can exclude up to $250,000 of the gain from your home sale. This amount rises to $500,000 for married couples filing jointly.”

To qualify for this exclusion, you must meet the following criteria…

• You must have owned the home for at least two years within the five-year period leading up to the sale (the two years don’t need to be consecutive). For married couples filing jointly, it is sufficient if just one spouse meets this criterion.
• The home must have been your primary residence for at least two of the five years before the sale. For married couples filing jointly, both spouses must fulfill this requirement.
• You must not have sold another home within the two years prior to the sale, or if you did, you should not have claimed the exclusion of gain on that sale.

If you believe you might qualify, be sure to consult a Dallas-Fort Worth, Texas agent. For more information, call (214) 296-2343.

Special Circumstances

Even if you don’t meet the criteria mentioned above, you might still be eligible for a full or partial exemption when selling your home in Dallas-Fort Worth, Texas. Special qualifying circumstances include…

• Gaining ownership of the home during a separation/divorce
• If your spouse died during your ownership of the home
• Owning a “remainder interest” in the home when selling
• Having your previous home condemned
• Being a service member during your ownership of the home
• Releasing the home in a “like-kind” exchange

Calculating Capital Gains Tax

To estimate your potential capital gains tax when selling your home, you’ll need to determine the cost basis of the property.

The cost basis includes the amount you paid to purchase the home, plus any expenses for improvements made over the years. For example, if you bought the home for $300,000 and invested $50,000 in improvements, your cost basis would be $350,000.

Next, calculate the total sale price of the home, deducting any fees for things like closing costs and real estate agent services. Then, subtract your cost basis from the sale proceeds. This will give you the amount subject to capital gains tax.

Get Professional Assistance

If you find the capital gains tax process confusing and intricate, you’re not alone—it certainly can be. When selling your home, it’s wise to consult both a tax professional and a seasoned investor in Dallas-Fort Worth, Texas. We can walk you through the essentials to help ensure the best possible outcome from your sale. For any questions about the tax implications of selling your home in Dallas-Fort Worth, Texas, be sure to contact us at (214) 296-2343.