Real Estate Guide

Selling Your Home - Questions and Answers
'Tax Considerations'

• Where do I get information on IRS publications?
• Explain the home mortgage deduction.
• Are seller-paid points deductible?
• Can I deduct the loss I suffered when I sold my home?
• Can I Avoid Paying Capital Gain Tax?
• Are taxes on second homes deductible?
• Will my vacation home qualify for a '§1031 Exchange'
• What are the rules on capital gains when inheriting a house?

What should I watch for in a contract?

See ► Home Sellers: Seven Purchase Contract Items To Watch For

Where do I get information on IRS publications?

See ► Real Estate Guide: Resources - Where do I get information on IRS Publications.

Explain the home mortgage deduction.

See ► Real Estate Guide: Home Ownership (Tax Considerations) - Explain the home mortgage deduction.

Are seller-paid points deductible?

As of Jan. 1, 1991, homeowners have been able to deduct points paid by the seller. This deduction previously was reserved only for points actually paid by the buyer.

Can I deduct the loss I suffered when I sold my home?

The Internal Revenue Service currently does not allow deductions for losses on the sale of your own home. In fact there's no way to use a loss on the sale of your principal residence to your advantage on your income tax return. (Note: a loss on the sale  of rental income property, however, is deductible.)

Can I Avoid Paying Capital Gain Tax?

If the home you're selling is your principal residence the tax law, as presently written, is very generous and most Americans should avoid paying any capital gain tax.

If your home is not your primary residence (a second home or investment property), you probably will have to pay capital gains.  However, Section 1031 of the U.S. Internal Revenue Code allows investors to defer capital gains taxes on the exchange of like-kind properties. Taxpayers should never have to pay income taxes on the sale of property if they intend to reinvest the proceeds in similar or like-kind property.

See ►

• Home Sellers: Capital Gains.
• 1031 Exchanges
• Real Estate Guide: Investing In Real Estate -Tax Considerations

Are taxes on second homes deductible?

See ► Real Estate Guide: Investing In Real Estate - Tax Considerations,  Taxes on Second Homes.

Will a vacation home qualify for tax deferral under IRC §1031 (commonly known as a '1031 Exchange').

See ► Real Estate Guide: Investing In Real Estate - Tax Considerations - 1031 Exchange

What are the rules on capital gains when inheriting a house?

See ► Real Estate Guide: home Ownership (Tax Considerations) - What are the rules on capital gains when inheriting a house?