Tax Deductions: Home Selling and Moving Costs
March 6th, 2013
March 6th, 2013
Tax day, April 15, is fast approaching. And we all like to find ways to reduce our taxes and save some of our hard-earned cash. Well, if you sold your home and moved for your job in 2012, you may qualify for tax deductions on the costs associated with selling your home and moving, depending on certain qualifications.
If you sold your home last year and realized a capital gain, you can reduce your taxable gain by the amount of your selling costs.
When you sell your home, the Internal Revenue Service (IRS) considers the original purchase price of your home as your basis. However, you must subtract any points the seller paid that may have been included in the purchase price of your home. Then you add to this figure any purchases you’ve made for capital improvements to your home while you’ve lived there, such as adding a room, a pool, a garage or major landscape improvements. Once you’ve determined this figure, then you need to deduct any depreciation. The final total cost represents your basis.
Your capital gain is determined by taking your home’s selling price and subtracting your basis cost. To reduce your taxable capital gain, you can deduct your selling costs. These costs include:
According to the IRS, you may be able to deduct your moving expenses if you moved because:
IRS-approved moving expenses include the costs for:
However, you must meet certain qualifications in order to deduct these moving expenses.
Distance test – Your new job location must be at least 50 miles farther from your old home than the distance between your old home and your old job location.
Time test – During the first 12 months after you arrive to your new job location, you must work full-time for at least 39 weeks. If you’re self-employed, you must work full-time for at least 39 weeks during the first 12 months and for a total of at least 78 weeks during the first 24 months after you arrive to your new job location. If you deduct moving expenses on your tax return, but you don’t meet these time tests, you’ll have to file an amended tax return or include the moving expenses in your income for the next year.
You cannot deduct any moving expenses covered by reimbursements from your employer that are excluded from income.
Regardless of whether you've recently sold your home and moved, you should always talk with your tax advisor to determine what deductions apply to your particular situation.
If you’re looking to buy a new home or refinance this year, contact Grandview Lending. Our mortgage specialists can work with you to find the right loan for your needs.
We provide our clients with exceptional service and integrity which has become our hallmark.