Buying or selling a home comes with various tax implications, from potential deductions for mortgage interest and property taxes to the possibility of excluding gains from the sale of your main home from income.  In this guide, we will cover:

  • The journey of buying and selling a home and its tax significance
  • Understanding the primary tax benefits and obligations as a homeowner
  • How the IRS views your home as an investment

Benefits of Buying a Home

  • Mortgage Interest Deduction
    • Eligibility criteria and claiming the deduction
  • Real Estate Tax Deductions
    • Deducting property taxes
  • Homebuyer Credits
    • Potential credits and eligibility (historical perspective and current availability)

Selling Your Home

  • Exclusion of Gain from Income
    • Qualifying for the exclusion
    • Claiming the exclusion on your tax return
  • Reporting the Sale
    • Which forms to use
    • When to report the sale

Adjusting Your Cost Basis

  • Home Improvements and Adjustments
    • What qualifies as a home improvement
    • How improvements affect your cost basis
  • Selling Costs
    • Which selling expenses can be added to your cost basis

Tax Considerations When Moving

  • Deducting Moving Expenses
    • Eligibility criteria (for military members)
    • Claiming the deduction (if applicable)

Home Office Deductions

  • Qualifying for a Home Office Deduction
    • Criteria for claiming the deduction
    • Calculating the deduction amount

Energy-Efficient Home Improvements

  • Credits for Energy-Efficiency
    • Eligible improvements and available credits
    • Claiming credits for green investments

Final Thoughts

  • A checklist for tax-smart homeownership and home selling
  • Essential IRS forms and publications
  • The importance of consulting with a tax professional

Detailed Bullet Points for the IRS Sections:

  • IRS References:
    1. Mortgage Interest Deduction: IRS Publication 936
    2. Real Estate (Property) Tax Deduction: IRS Topic No. 503
    3. Home Sale Exclusion: IRS Topic No. 701
    4. Reporting Home Sale: IRS Form 1099-S and IRS Publication 523
    5. Home Office Deduction: IRS Publication 587
    6. Moving Expenses: IRS Publication 521 (for Armed Forces members)
    7. Energy Credits: IRS Form 5695 and instructions