Making Cents: Things To Do When Selling A Home
By: John P. Napolitano, CFP®, CPA, PFS, MST
With the spring real estate market about to blossom, there are a few things about selling your home that may be worth evaluating before the sign goes into the ground.
If you are going to do any fix up in preparation to sell, talk to a few real estate professionals about the merit of your fix ups and the anticipated payback. There are lots of opinions regarding what you should do, but the real answer depends on the price point of your home and the local market conditions.
The next part is pricing the home. Everyone wants to maximize their selling price, but today’s buyers are quite picky if you are trying to get every cent out of the sale. You may consider attending a few open houses to see what comparable homes are asking. Selecting a broker should be done based on more than how a realtor may price the home. Some may come in with an unrealistic market survey simply to get your listing. It also seems that even the real estate business is being impacted by online listings and virtual brokers. Investigate this option before you plunk down 5 or 6 percent to a full service broker. In a real hot market it may not be necessary to hire a full service realtor.
Think about your financial situation after the sale. If there is going to be a gain on your home, plan ahead to be sure that there will not be any tax due from the sale. The IRS rules now allow for a gain of up to $250,000 for single taxpayers and up to $500,000 for married taxpayers filing jointly to be excluded from income. Anything north of that will be taxed. It is also important to note that you may only claim this exclusion once every two years. So if your home was a fixer upper where you’ve created a nice gain, then you may have to wait a bit before selling.
If you’ve ever used the home for business and depreciated a portion of the home, that may also trigger some tax. The same would hold true if you ever rented a part of this house, as in a two plus family residence or if you rented the entire residence while living somewhere else. Plan ahead for this and speak to your CPA in advance of the sale to know your options.
This is also a good time to begin putting together all of the tax cost data for your home. Your tax cost includes your purchase price, plus any improvements made to the property. It is important to distinguish maintenance from improvements. Painting the home, for example, is not considered an improvement and would generally not add to your tax basis of the property. On the other hand, painting and other maintenance type of fix ups done just before the listing to spruce up the home for sale may be included as a fix up cost and added to your basis.
John P. Napolitano CFP®, CPA is CEO of U. S. Wealth Management in Braintree, MA. Visit JohnPNapolitano on LinkedIn or uswealthnapolitano.com. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor. US Wealth Management, US Financial Advisors and LPL Financial do not offer tax advice. John Napolitano is a registered principal with and securities offered through LPL Financial, Member FINRA/SIPC. Investment advice offered through US Financial Advisors, a Registered Investment Advisor. US Financial Advisors and US Wealth Management are separate entities from LPL Financial. He can be reached at 781-849-9200.