Tax Tips For Selling Your House in Oklahoma!
Are you thinking about the tax consequences of selling a house in Oklahoma?
Selling real estate often means big sale proceeds. Unfortunately, huge portions of your cash may need to be paid to the government. The tax implications of your home sale may be the determining factor on whether you should sell at all.
Think ahead. You don’t pay taxes immediately upon the sale. Tax obligations are due in April. If you spend the proceeds before tax season, you could find yourself unable to pay the tax debt.
Get all the tricky issues straightened out before you conclude the sale.
This blog tackles a few tax tips regarding selling your Oklahoma property, including the “Capital Gains Tax Exemption”, reporting issues, the first-time homebuyer credit, and selling cost deductions. For specific questions, of course, consult with a qualified accountant or the state/federal taxing agencies.
Not All Profits Are Taxable: “Capital Gains Tax Exemption”
You can exclude a portion of profits when selling your Oklahoma house via the “Capital Gains Tax Exemption.”
When selling your house in Oklahoma City, you can exclude a high portion of your profits given specific conditions are met. Typically, you can exclude $250,000 from your tax return, and up to $500,000 if filing a joint return. (However, if you sell for a loss, you won’t be able to take a deduction for that amount.)
The deduction is only available when selling your primary residence, and can only be used once every two years. To qualify for the deduction, you must have lived in the residence for at least two of the past five years.
Check out Investopedia’s article on this topic. They reported that:
When you sell your home, the capital gains on the sale are exempt from capital gains tax. Based on the Taxpayer Relief Act of 1997, if you are single, you will pay no capital gains tax on the first $250,000 you make when you sell your home. Married couples enjoy a $500,000 exemption. There are, however, some restrictions on this exemption.
In order for the sale to be exempt, the home must be considered a primary residency based on Internal Revenue Service (IRS) rules. These rules state that you must have occupied the residence for at least two of the last five years. If you buy a home and a dramatic rise in value causes you to sell it a year later, you would be required to pay capital gains tax on the gain. This rule does, however, allow you to convert a rental property into a primary residence because the two-year residency requirement does not need to be fulfilled in consecutive years. For example, suppose that you invest in a new condo. You live in it for the first year, rent the home for the next three years and, when the tenants move out, you move back in for another year. At the end of this five-year period, you will be able to sell your condo without having to pay capital gains tax.
If you do not qualify for the “Capital Gains Tax Exemption”, you might still be able to exclude a portion of your profits from your income tax. There are many special conditions you can meet in order to receive a prorated, tax-free gain. If you need to sell because of a change in your health, a job change or other unforeseen circumstances, you will be able to write-off a portion of the profit.
Reporting the Sale For Your Oklahoma Property. You will need to report the sale if you receive a 1099-S form from the closing agent. Form 1099-S is used to report gross proceeds from the sale or exchange of real estate and certain royalty payments. A 1099-S form must be provided to the recipient and a copy mailed or e-filed to the IRS.
This form provides the IRS with information regarding the proceeds from real estate transactions. To avoid reporting, make sure that you are able to exclude all profits. Let the agent know at the time of closing that the form will not need to be issued. Even if you are able to deduct all profits, if the form is issued, you will still need to file it with the IRS… even if no money is owed.
Check out the Form 1099-S here.
Capital Gains Taxes
If you are selling an investment property or house you have only owned briefly, you will likely be subject to the capital gains tax. A capital gains tax is a type of tax levied on capital gains, profits an investor realizes when he sells a capital asset for a price that is higher than the purchase price. Capital gains taxes are only triggered when an asset is realized, not while it is held by an investor.
Capital Gains taxes are dependent on how much you make. If you have a lower income, you will pay no capital gains taxes. People in higher tax brackets can pay upwards of 20%. Short-term assets are typically taxed the same as ordinary income.
Deduct Selling Costs
You may be able to deduct any reasonable cost when selling your Oklahoma house.
This includes the closing costs, improvements made in order to sell the house, assessments, marketing costs, agent fees. Keep track of every cent you spend in an effort to sell your home. This can amount to big deductions!
No matter what time of the year you sell, don’t forget to seek the counsel of professionals. Consult your accountant and/or attorney to make sure you have set up the best terms for yourself.
Don’t stress too much about taxes when putting your house up for sale in Oklahoma. Odds are Uncle Sam won’t be getting his hands on your profits.