Made a profit selling your home in 2022? Here's how to trim your tax bill

Abstract

Home sellers made a $112,000 profit on the typical sale in 2022, a 21% increase from 2021, and a 78% jump from two years ago, according to ATTOM, a nationwide property database. While most sellers fall under the thresholds for capital gains taxes, high-dollar home sales or long-term ownership can trigger an unexpected bill, experts say. As a single home seller, you can exclude up to $250,000 of your profit from capital gains taxes and you can shield up to $500,000 as a married couple filing together, assuming you meet certain IRS rules. You may owe capital gains taxes if your home profit exceeds those thresholds. Many home sellers don't realize there's potential to reduce profits - and possibly lower capital gains - by increasing their property's purchase price, known as "Basis," according to Jariwala. "Your purchase price of the home is the starting point for your basis," she said, explaining you can tack on the cost of "Capital improvements." "If someone has had their home for 10 years and they're selling it, they may have forgotten improvements they've made," such as replacing the roof or putting in new floors, Jariwala said. "It's really important to make sure you are keeping documentation of all the things you've done to your home over the years," she said.