Yes, even during a pandemic, the Ventura County housing market flourished. If you happened to sell your property in 2020, you need to think about how this affects your taxes. Last year, the government delayed our usual tax deadline date until July. However (so far), it appears that this year returns to the normal April 15th deadline. But you can never start preparing too early. To help you out, the following is a list of tax deductions, write-offs, and exemptions you might want to keep in mind for tax day.
Tax Deductions for the Home Seller
You probably had to come up with some money out of your own pocket/profits in order to sell your Ventura home. These included escrow fees, agent commissions, advertising costs, and possible legal fees. As long as you lived in your home for at least two of the past five years, you may deduct these costs on your taxes. Just make sure they were all associated with the sale of your Ventura home.
Again, only those improvements and repairs you completed to make your property more marketable will be considered for tax deductions. That includes anything from painting rooms all the way up to totally renovating your kitchen. However, only the costs associated with improving/repairing your property completed within 90 days of your closing date (when you sign your final paperwork and hand over the keys) may be considered for tax deductions.
Property Taxes and Mortgage Interest
When you owned your Ventura home, your mortgage interest and at least a portion (if not all) of your property taxes were allowed to be claimed as tax deductions. The same holds true when you sell. Anything you pay up until the date you sell your home may be used as a tax deduction. For property taxes, anything paid for the year up to $10,000 may be tax-deductible. For mortgage interest, you may deduct any interest paid up to $750,000 of your mortgage debt. However, if you took out your current mortgage before December 15th, 2017, you may deduct the interest paid up to $1,000,000 of your mortgage debt. You must itemize your taxes in order to claim the mortgage interest deduction. Discuss with your tax preparer before filing whether or not itemizing works in your best interest.
Capital Gains Tax Exemption
While technically not a “deduction”, the capital gains tax exemption still works in your favor on your taxes. The difference between what you paid for your Ventura home and what you sold it for is called “capital gains”. Uncle Sam considers this income. Therefore, it is eligible for income tax consideration. However, the law allows you to exclude up to $250,000 in profit for individuals ($500,000 if you are married and filing jointly) from this tax. What does that mean? If you paid $250,000 for your home a few years ago and sold it for $550,000 in 2020, only $50,000 of that is considered “income” for individuals. For married couples, none of it would be considered income. But you must have lived in the home for at least two of the last five years in order to qualify for this capital gains exemption.
Always discuss these tax deductions and exemptions with your tax preparer before filing your taxes. Tax laws change from year to year. They should be aware of all current laws in effect at the time of your filing. Good luck and happy filing.