What Taxes Do I Pay When Selling a House?

Whether you are doing it for the first time or have sold properties before, selling a Killeen home is tricky.

The home-selling process is often confusing for the average person, especially when finances are involved. Taxes, in particular, can seem even more daunting to those selling their home for the first time. If you are currently selling a home and would like to know more about the taxes required to pay on your property’s profit, We Buy Killeen Houses has prepared a brief guide with the information you need.

Do You Have to Pay Taxes on a Home Sale?

Yes! As a general rule, everyone selling their home must pay taxes on the profit, though certain exceptions allow you to ultimately reduce or eliminate the taxes.

For example, if you have lived in your home for at least two years of your first 5 years of ownership and now want to sell it, the first $250,000 is tax-free, so you do not have to pay any taxes. For married and filing their taxes jointly, the tax-free amount is $500,000.

Your home must be your primary residence to qualify for this exception, meaning the home must be where you permanently live. Short absences are allowed.

How Can You Determine the Exact Profit From a Home Sale?

To determine the profit you will make from selling your house; you should first identify the cost basis for your home. The cost basis is the sum of the price you paid for your property and any home improvements. For example, if you spent $15,000 on bathroom remodeling and progress, you should add this amount to your home’s cost basis. It will help to save all the receipts from your remodeling and improvement projects.

Some circumstances may impact your property’s cost basis. For example, if a fire occurred and damaged your home, the amount of money you received from your insurance company to pay for repairs may reduce the cost basis of your home.

Next, subtract certain costs from the amount you receive from selling your home. These costs include the realtor’s fee, closing costs, and other expenses. 

The final step is subtracting the cost basis from the total amount you got from selling your home. If the final sum is less than $250,000, you are excused from paying taxes.

Applying for a Reduced Exclusion

You can apply for a reduced exclusion, claiming a part of the tax break if you do not meet the above requirements. You can claim a reduced exclusion for one of the following reasons:

  • health issues that require relocation
  • change in employment 
  • family circumstances (such as divorce)

Sell Your Home to a Cash Home Buyer to Reduce the Amount of Taxes

If you would like to reduce the taxes, you have to pay for the home sale assets; selling your property to a cash buyer may be suitable. Cash buyers purchase properties regardless of their condition and do not require any repairs or upgrades, making this an excellent choice for anyone looking to save money.

If you are searching for a cash home buyer in Killeen, TX, or any nearby town, do not hesitate to contact We Buy Killeen Houses. We buy houses in any location and condition, and we pay cash. Therefore, if you are looking for an option to sell your home fast and reduce your taxes, you should contact us today. Please visit our website or give us a call for more information 254-268-2988!