Original Content by Carl Johnson
We sat down with a local tax expert and licensed CPA to ask some questions for you, our homebuyers and home sellers, to better understand year-end tax considerations while in the housing market and dealing with your main residence. As always refer to an expert for personal tax needs and questions but enjoy our interview with our local CPA to help you gain some insight into main residence tax homeownership.
Q: Closing costs can be a big additional expense homebuyers don’t often think of while purchasing or selling a home? Are these costs something that can be tax deductible?
A: “Closing costs generally reduce gain on the sale of your home, if you are selling; closing costs related to buying a new home generally do not have any tax effect at the time of purchase.”
Q: North Carolina and the Triangle are popular locations for out of state people to look for homes as jobs pull them into the area. How does buying a new home or selling a home while moving states affect my taxes? Do state taxes vary based on which state your home is sold in even if you live in a new state?
A: “Tax on gain realized on the sale of property is generally levied by the state in which the property is located.”
As the homes are still in demand and sellers are getting asking price if not more on their homes, capital gains is something for our clients to be aware of. Capital gains tax is defined as “the levy on the profit that an investor makes when an investment is sold” (Capital Gains Tax: What It Is, How It Works, and Current Rates (investopedia.com)) and varies depending on the amount of years the property is owned for.
Q: If I sold a home in the beginning of the new year but haven't bought another home during the year, will I get hit with capital gains tax? Or do I have a few years to reinvest that money into my next home purchase?
A: “Whether a home sale generates capital gains tax is not related to whether or not you purchase another home after, or the details about the purchase of your new home; you do not have a few years to reinvest into another main residence to avoid capital gains tax, any gain related to the sale of your main residence will be recognized in the year of the sale.”
Q:What tax benefits (or negatives) can I expect to see on my personal taxes if I am…
Closing in December as a Seller?
A: “Depends, you may have taxable gain to recognize in 2023 - eligibility for the Home Sale Exclusion and the amount of gain realized with the sale are some factors to consider.”
Closing December as a Buyer?
A: “None generally.”
Closing January as a Seller?
A: “Depends, you may have taxable gain to recognize in 2024 - eligibility for the Home Sale Exclusion and the amount of gain realized with the sale are some factors to consider.”
Closing January as a Buyer?
A: “Depends, if you have a mortgage you may benefit from including the interest on your 2024 return if you itemize deductions, but that determination includes many other factors.”
Q: Can moving expenses be considered tax deductible?
A: “Generally no (only in niche situations related to military service)”
Q: If I as a buyer or a seller closing on my home at the end of the year, will I get all the paperwork I need to file my taxes in time? Or does it take a while to get the proper paperwork?
A: “Depends on the agent/bank/broker and how quickly they provide those documents.”
Q: When are new tax changes announced for next year’s tax filing? For example are 2024 tax rules/changes already made available. Would people benefit from waiting to see if new changes come about for home sellers/purchasers?
A: “There are no tax changes related to buying/selling a home that I'm aware of.”
As we stated above taxes are personal for each individual and you should consult with a licensed CPA for questions or help. But as a Real Estate Broker we realize that the buying and selling of a home is a unique experience for many and we are here to help you each step of the way. We like to keep our clients informed with the best and most up to date information from the housing marketing, sales reports, even tax incentives, and share our many resources with you. This is why we are a trusted and award-winning team at Carl Johnson Real Estate. CLICK HERE to see one of our great resources on a first-time homebuyer checklist to get yourself ready!
This article is intended to assist with general knowledge for tax preparation and is not advice or information for any individual’s needs. Consult with a CPA for your individual needs. Carl Johnson Real Estate does not claim any responsibility for the content in this article as it was supplied by another party.