How to maximize your gain when selling

California Capital Gains Exclusion 

When selling your home, the first thing you want to know is, how much will I have when the dust settles? Will it be enough for the house I want to buy, our Hawaiian vacation, or to put some away for my kids college fund? The price tag, the estimate of value, sounds good, but what will be left after the mortgage is paid and all the expenses and fees are taken care of? And how much of my gain is going to go to taxes? We need to nail down those answers before someone presents us with an offer!

That last one, how much is Uncle Sam going to want, can be disappointing and maybe a little scary… or maybe not. If you’re selling for $700,000 more than you paid to buy the place, you don’t want to pay capital gains tax on all of that, and you may not have to. When selling your principal residence, any property in which you have resided for at least two of the last five years, the IRS allows you to exempt $250,000 of your gain, $500,000 for couples filing jointly. 

While anything over that $250,000 or $500,000 figure will be considered a taxable gain, there are other deductions that could help reduce that liability even further. There are deductible expenses for any upgrades you may have made: new kitchen, new roof, swimming pool, upgraded windows or flooring, and more. These items are essentially added to the amount you paid to buy the property, thus reducing your taxable gain. You may have to make a “donation” to the IRS, but it might not be as bad as you thought. We can help you with that math. 

One of the first things we’ll do, during our initial consultation, is to begin the process of sketching out the costs associated with the sale, as well as what expenses might qualify to reduce your taxable gain. We want you to know what to expect, before the sign goes up in your yard. This might involve your tax advisor, in order to be certain that all deductions will qualify.

Deductible expenses of the sale might include upgrading your sewer connection, repairing some dry rot, new flooring, and more. We can discuss what other items might qualify as well.

Our goal is to get you out with as much “moving on” money as possible. Part of that is our marketing plan to maximize value and selling price, but counting all the miscellaneous “beans” is important as well. We’ll make sure to spot all the potential bumps and potholes in the road to make everything go smoothly.