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Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 3730
Experience:  Juris Doctorate, CFP and MBA, Providing Financial & Tax advice since 1986
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Selling a home What can be deducted from the profit?

Resolved Question:

Selling a home
What can be deducted from the profit?
Submitted: 1 year ago.
Category: Tax
Expert:  Lane replied 1 year ago.

NPVAdvisor :

Hi,

NPVAdvisor :

Is the home your primary residence (lived in any 24 months out of the last 5 years)?

Customer:

Hi there! This was secondary we kept for over 10 years

NPVAdvisor :

OK, then you can certainly deduct all selling expenses ...

NPVAdvisor :

Sales commissions and other legitimate selling costs (from the gain)

Customer:

I do know that.

NPVAdvisor :

Also, you basis in the property can be adjusted up fpr improvemens to the property

Customer:

How about improvements, updates.

NPVAdvisor :

yes :)

Customer:

Do I have to provide documents?

NPVAdvisor :

adds to basis, therefore lessening gain

NPVAdvisor :

No

NPVAdvisor :

It would be good to document in any way you can, in the event of an audit

NPVAdvisor :

but this is very common

NPVAdvisor :

no flags gere

Customer:

What is a typical deduction allowed over the years?

Customer:

what do you mean by "no flags gere?"

NPVAdvisor :

Nothing atypical, out of the ordinary

NPVAdvisor :

One the second questions?

NPVAdvisor :

sorry for the typo... ON your other question ....

NPVAdvisor :

You need simply to add to the basis improvements you made

Customer:

Is there a IRS document I can study?

NPVAdvisor :

That one's all pover the board

NPVAdvisor :

some add bathrooms and decks

NPVAdvisor :

some do no more than maybe update cabinets

NPVAdvisor :

Sure, let me get that for you

Customer:

Thanks.

NPVAdvisor :

lets say you bought for 100,000 and sell for 200,000

NPVAdvisor :

but added a deck for 20,000 ... now you have an 80,000 (rather than a 100,000) gain

NPVAdvisor :

and remember this is capital gains not ordinary income, so tax rate will not be as high

NPVAdvisor :

  • 0% applies to long-term gains and dividend income if a person is in the 10% and 15% tax brackets,

  • 15% applies to long-term gains and dividend income if a person is in the 25%, 28%, 33%, or 35% tax brackets, and

  • 20% applies to long-term gains and dividend income if a person is in the 39.6% tax bracket.

Customer:

Any other remark?

NPVAdvisor :

I thnk that's about it 1. It's capital gains , 2. improvements add to basis, 3. selling costs subtract from sales price

Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 3730
Experience: Juris Doctorate, CFP and MBA, Providing Financial & Tax advice since 1986
Lane and 4 other Tax Specialists are ready to help you
Expert:  Lane replied 1 year ago.

Thank you Hans.

Lane

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