If you’re wondering what expenses are deductible when selling a second home, you’ve to come to the right place. Although, we should mention, that the advice in the post is also useful for anyone selling a rental property or flipping a house too.
From the perspective of a person who wants to sell their “second home,” they have to realize it’s an investment property. So, it may cost you more in taxes to sell the property, but there are ways in which can reduce your tax burden.
So, let’s now venture into what expenses you can deduct from selling a second home to save you some money!
Real Estate Tax Deductions
There are several categories to consider if you are selling your second home, rental property, or fix and flip home. The first one is the cost of purchase of the home. But, keep in mind that this is only deductable once you sell the property.
Next, if you did any renovations to the property, you can deduct the costs of any materials and labor. These costs, again, can only be deducted after the sale of the property.
Other key areas where you may be able to get tax deductions include:
- Accounting and legal fees
- Building permit costs
- Loan interest
- Vehicle and travel expenses
Furthermore, you may also be able to deduct office and business expenses. Plus, if you used a real estate agent to purchase the home, you may be able to deduct from any commission you paid.
To learn more about how you can sell a home and make these deductions, we recommend Explore Real Estate.
Consider Making It Your Primary Residence
So on the face of it, if you were to sell your primary residence, you would pay less in capital gains tax than if you were to sell your second home. But what defines a primary residence in terms of capital gains tax?
Well, the IRS states that you have to reside in your home for two years or more for it to be your primary residence. Yet, there is no requirement that you have to live in that property for two consecutive years.
A single person, the IRS allows you $250,000 excluded from capital gains. If you are married, that figure jumps up to $500,000.
So one way you can get these tax benefits is to live in your second home for a year, then swap back to your primary residence. Then you could do another year at a later date. It doesn’t matter how you do it, as long as you get those two years official before selling a home as your primary residence.
Furthermore, if you do your two years in the property, you can then deduct any repairs and improvements you did to that home. So this will reduce your tax burden even further!
What Expenses Are Deductible When Selling A Second Home Explained
We’ve now answered, for the most part, the fundamentals of what expenses are deductible when selling a second home. We also hope you find the tip about making the home your primary residence helpful.
So many thanks for checking out this post. If you like what you read, why not check out some other posts on our blog too?
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