Tax Deductions for Fort Worth Home Sellers
Fort Worth, Texas · Seller Resources
Selling a home in Fort Worth can be a major financial milestone, especially if your property has increased in value over the years. While Texas does not have a state income tax, Fort Worth home sellers may still need to consider federal taxes, capital gains rules, property taxes, and closing costs when preparing for a sale.
Good news, several seller expenses may help lower your tax bill, but not all of them work like a standard deduction. Some costs may be deductible if you itemize, while others may reduce your taxable gain by adjusting your sale proceeds or increasing your home’s tax basis.
Guide to Top 5 Tax Considerations for Home Sellers
1. The Home Sale Capital Gains Exclusion
The biggest tax benefit for many home sellers is the federal home sale capital gains exclusion. If the home was your primary residence and you meet IRS ownership and use rules, you may be able to exclude up to $250,000 of gain if you file as single, or up to $500,000 if you are married filing jointly.
In general, the IRS requires that you owned the home and used it as your main home for at least two of the five years before the sale. There are additional rules and exceptions, so sellers should review their situation with a qualified tax professional.
2. Real Estate Agent Commissions and Selling Costs
Real estate commissions are often one of the largest seller-paid expenses at closing. For tax purposes, commissions and certain other selling costs may reduce the amount realized from the sale, which can lower your taxable gain.
Other possible selling expenses may include certain title fees, escrow fees, legal fees, recording fees, owner’s title insurance, advertising costs, and seller-paid concessions. Fort Worth sellers should keep a copy of the final closing disclosure or settlement statement so their CPA can review which costs may apply.
3. Capital Improvements That Increase Your Home’s Basis
Major improvements can help reduce taxable gain by increasing your home’s adjusted basis. These are not usually deducted like a regular expense. Instead, qualifying improvements are added to what you invested in the property.
Examples may include a new roof, HVAC system, kitchen remodel, bathroom addition, new flooring, built-in appliances, landscaping, fencing, patio, windows, insulation, plumbing, or electrical upgrades. See Home Upgrades That Pay Off When Selling in Fort Worth for more ideas. Routine repairs usually do not count unless they are part of a larger remodeling or restoration project. The IRS explains these rules in IRS Publication 523: Selling Your Home.
Two Fort Worth Sellers, Same House, Different Outcome
Good Records Could Save Thousands
Imagine two Fort Worth homeowners bought nearly identical homes in 2008 for $240,000. Both sell them today for $565,000.
Before selling, each homeowner replaced the roof, remodeled the kitchen, installed new windows, and replaced the HVAC system. Together, those projects cost about $78,000.
Seller A kept receipts, contractor invoices, and permits.
Seller B threw everything away years ago.
When they meet with their CPA, Seller A may be able to include those qualifying improvements in the home’s adjusted basis, while Seller B may not have enough documentation to support the same claim if questioned.
If Seller A is in the 15% long-term federal capital gains tax bracket, documenting those improvements could reduce federal capital gains tax by about $11,700 ($78,000 × 15%). If the seller is in the 20% bracket, the savings could be about $15,600.
That’s why many CPAs tell homeowners to save receipts for major improvements long before they decide to sell. IRS Publication 523 explains which improvements may qualify and what records homeowners should keep.
4. Property Taxes Paid During the Year of Sale
Fort Worth homeowners typically pay property taxes through Tarrant County or another applicable local taxing authority. If you sell your home during the year, property taxes are usually prorated between the buyer and seller at closing.
If you itemize deductions, you may be able to deduct the portion of real estate taxes that applies to the time you own the home. Federal limits may apply, so sellers should review the rules in IRS Publication 530: Tax Information for Homeowners and confirm the details with a CPA or tax advisor.
5. Mortgage Interest Paid Before the Sale
If you had a mortgage on your Fort Worth home, you may be able to deduct eligible mortgage interest paid before the sale if you itemize deductions and meet IRS rules. This may include interest reported by your lender on Form 1098 for the part of the year you still owned the home.
Mortgage interest rules can depend on several factors, including when the loan was taken out, the size of the mortgage, and whether the debt was used to buy, build, or substantially improve the home. Because these limits can vary, sellers should review their mortgage interest information with a CPA or tax advisor before filing.
A Texas-Specific Note: No State Income Tax or Real Estate Transfer Tax
Fort Worth home sellers benefit from the fact that Texas does not have a state income tax. This means Texas does not tax capital gains from a home sale, although federal capital gains tax may still apply.
Why Timing Matters Before You Sell
The timing of a home sale can affect whether certain tax benefits are available. For example, if a seller is close to meeting the IRS rules for the home sale capital gains exclusion, it may be worth speaking with a CPA before choosing a listing date or closing date.
In some cases, waiting until the seller meets the IRS ownership and use requirements could help them qualify to exclude part or all of their gain. The IRS generally requires that the seller owned the home and used it as their main home for at least two of the five years before the sale. You can read more about these requirements in IRS Topic No. 701: Sale of Your Home.
Burt Ladner Real Estate does not give tax advice, but we can help sellers think through important timing questions, stay organized before listing, and know when to involve a qualified tax professional. If you are preparing to sell, review these 10 steps to take before listing your Fort Worth home so you can address repairs, documentation, pricing, and other important details before your property goes on the market.
Experts Who Can Help
A Burt Ladner Real Estate agent can help you understand your expected selling costs and organize important transaction documents, but tax advice should come from a qualified tax professional.
As a Fort Worth home seller, you may benefit from working with:
- A CPA or tax advisor to calculate gain, exclusions, deductions, and basis adjustments. You can verify a Texas CPA through the Texas State Board of Public Accountancy License Lookup or search for credentialed tax preparers through the IRS Tax Return Preparer Directory.
- A real estate agent to help document commissions, concessions, repairs, and closing costs.
- A title company or escrow officer to provide the final closing disclosure and settlement records.
- A real estate attorney for complex situations involving estates, divorce, liens, title issues, or seller financing. You can search for Texas attorneys through the State Bar of Texas Attorney Search.
- A financial planner if the sale will affect retirement, investment planning, or estimated taxes. You can search for a certified financial planning professional through the CFP Board verification tool.
- A contractor or remodeler who can provide invoices and records for qualifying improvements.
Final Thoughts
Tax deductions for Fort Worth home sellers are not always straightforward. Some costs may be itemized deductions, while others reduce your taxable gain by adjusting the sale price or increasing your basis. The most important step is to keep accurate records and review your situation with a qualified CPA or tax advisor before filing.
For many sellers, the biggest opportunities come from the home sale capital gains exclusion, real estate commissions, seller-paid closing costs, qualifying capital improvements, property taxes, and mortgage interest. Understanding these rules before closing can help you stay organized and avoid missing valuable tax benefits.
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