Selling your house is hard enough, but the work doesn’t end after you accept the offer and go into escrow.
There’s tax implications, some of you will be selling your house to buy another, and so on.
So, once you’ve made money selling your home, here’s the important things to know about what happens next.
Tax implications of selling a house
If you sell your home for more than you originally paid, which is almost always the case, you may be subject to paying federal taxes.
However, this is only the case if:
- You are a single tax filer and made more than $250,000 of profit
- A married filer and you made more than $500,000 of profit
However, you can avoid some of your tax liability by providing receipts for any improvements you’ve made over the years to the house.
You’ll also need:
- The closing statement you receive after sale of the home
- Two years of utility bills, tax returns, or anything else that proves the home you sold was your primary residence
- A 1098 form to show your paid mortgage interest and any real estate taxes you paid through escrow
- A 1099-S form (sometimes your title company or attorney will file this for you)
What documents you need to keep after selling your house
Outside of all the documents you need to keep for tax purposes, you’ll also want to keep:
- Proof of mortgage payoffs
- Settlement statements (called HUD-1) for the purchase as well as the sale of the house
- Renovation permits
- Proof of warranties – Home, pest control, large appliances included with the home
Selling your house to buy another
If you’re planning to use the proceeds of the sale of your home to buy another, the first thing you need to do is make it clear what date you need to close for both deals.
Obviously, the goal is to get the closing date for both homes to be as close as possible.
That’s going to be super difficult and require some luck, so here’s some other options to consider:
- Suitable storage unit for your items. Go ahead and spring for a climate controlled one if you need it. Don’t want to damage anything on top of paying for a storage unit.
- Ask the buyers of your old home to do a rent-back agreement that allows you to live in your current home after closing for a period of time and pay them rent.
- Find a short-term rental for you to stay in.
If these options don’t work for you, you could also get special types of financing to have extra cash while you’re waiting to sell your old home.
There’s two types to consider here:
- Home equity line of credit (HELOC): This uses the value of your home as collateral for the loan. You use this loan as a down payment on your next home and when you sell your house you pay off the HELOC with the profit. It’s extremely flexible and you can simply access the funds you need on an ongoing basis and only pay the interest on what you use. You may also qualify to pay only on the interest accrued during your initial repayment period.
- Bridge loan: This is a personal loan that is also repaid when you sell your old home. It’s much more expensive than a HELOC.
Ready to sell your home?
This may have been a lot to consider. But don’t worry, a helpful realtor should be able to walk you through this every step of the way.
For the past 30 years, the agents at Partin Real Estate have helped plenty of homeowners sell their homes and transition into a new living situation.
So, if you’re ready to list your current home for sale, fill out the form or give us a call and we can answer any questions you have!
