Tax Deductions When Selling a Home
While the $250K/$500K exclusion gets the most attention, several other tax deductions and adjustments can reduce your tax bill when selling a home. Understanding what qualifies can save you thousands.
Selling Costs That Reduce Your Gain
These costs are subtracted from your sale price when calculating your capital gain:
Deductible Selling Costs
6-10%
of sale price can be subtracted from your gain calculation
- Agent commissions
- Title insurance
- Escrow fees
- Transfer taxes
- Legal fees
- Advertising costs
- Staging costs
- Home warranty provided to buyer
Capital Improvements That Increase Your Basis
Capital improvements (not repairs) increase your cost basis, reducing your taxable gain:
- Additions (rooms, decks, garages)
- New roof
- New HVAC system
- Kitchen or bathroom remodel
- Landscaping (permanent)
- New windows or doors
The Difference Between Improvements and Repairs
Improvements add value, extend useful life, or adapt the property to new uses. They increase your basis. Repairs maintain existing condition (fixing a leak, painting) and do not increase your basis.
Moving Expenses
Since the Tax Cuts and Jobs Act of 2017, moving expenses are only deductible for active-duty military members who move due to a military order.
Property Taxes
Property taxes paid during the year of sale are deductible on your income tax return, subject to the $10,000 SALT deduction cap.
Mortgage Interest
Mortgage interest paid through the closing date is deductible on your income tax return, subject to standard limitations.
The Bottom Line
Keep records of all selling costs and capital improvements. These directly reduce your taxable gain and can save thousands in capital gains tax.