5 Tax Deductions When Selling a Home

You may be wondering if there are tax deductions when selling a home. And the answer is: YES!

If you sold your home last year (or are planning to in the future), your tax deductions when you file with the IRS can amount to sizable savings. Check out this list below of a full rundown of all the deductions (as well as tax exemptions or other write-offs) at a home seller’s disposal.

1. Selling costs

These deductions are allowed as long as they are directly tied to the sale of the home. You also had to have lived in the home for at least two out of the five years preceding the sale. Another caveat: The home must be a principal residence, not an investment property.

“You can deduct any costs associated with selling the home—including legal fees, escrow fees, advertising costs, and real estate agent commissions,” says Joshua Zimmelman, president of Westwood Tax and Consulting in Rockville Center, NY.

This could also include home staging fees. Just remember that you can’t deduct these costs in the same way as, say, mortgage interest. Instead, you subtract them from the sales price of your home, which in turn positively affects your capital gains tax (more on that below).

2. Home improvements and repairs

If you renovated a few rooms to make your home more marketable, you can deduct those upgrade costs as well. This includes painting or repairing the roof. But there’s a catch.

“If you needed to make home improvements in order to sell your home, you can deduct those expenses as selling costs as long as they were made within 90 days of the closing,” says Zimmelman.

3. Property taxes

This deduction is capped at $10,000.

4. Mortgage interest

As with property taxes, you can deduct the interest on your mortgage for the portion of the year you owned your home. Just remember that under the 2018 tax code, new homeowners (and home sellers) can deduct the interest on up to only $750,000 of mortgage debt. homeowners who got their mortgage before Dec. 15, 2017 can continue deducting up to the original amount up to $1 million, according to Zimmelman.

Note that the mortgage interest and property taxes are itemized deductions. This means that for it to work in your favor, all of your itemized deductions need to be greater than the new standard deduction, which the Tax Cuts and Jobs Act nearly doubled to $12,200 for individuals, $18,350 for heads of household, and $24,400 for married couples filing jointly. (For comparison, it used to be $12,700 for married couples filing jointly.)

5. Capital gains tax for sellers

The capital gains rule isn’t technically a deduction (it’s an exclusion), but you’re still going to like it. Capital gains are your profits from selling your home—whatever cash is left after paying off your expenses, plus any outstanding mortgage debt. And yes, these profits are taxed as income. Good news: You can exclude up to $250,000 of the capital gains from the sale if you’re single, and $500,000 if married. The only big catch is you must have lived in your home at least two of the past five years. However, look for the rules of this exemption to possibly change in a future tax bill.

Ralph DiBugnara, vice president at Cardinal Financial, says lawmakers might push to change this so that homeowners would have to live in the property for five of the past eight years, instead of two out of five.

Article originally appeared on Realtor.com.