_{Presented by Astra Properties LLC}
Optimizing Tax Liability: Leveraging Deductions Effectively in the Sale of Residential Properties
_{By Nicholas Burrus · 02/02/24
Thanks for tuning in to today’s read! Read time for today is roughly 5 mins.}

Happy Friday 🌄 

Sending you good vibes as you wrap up the rest of your week

In the spirit of tax season, we’ll be diving into a few breaks you can utilize if you’re selling a property.

What are these tax deductions and how to take full advantage of them?

Let's explore-

Selling a Residential Property? Take Advantage of These Tax Breaks

^{Save that $$$}

Tax deductions - what could be better?

If you're selling a home, you qualify for some tax breaks. These deductions will take a massive chunk off the tax bill, so do not miss them!

Tax deductions on selling costs 💰

Several costs related to selling a residential property can be deducted from the tax bill, including:

• Legal fees

• Escrow fees

• Advertising expenses

• Real estate agent commissions

• Home staging fees

One caveat: the deductions only apply to principal residences, not investment properties. If you lived in the house for at least 2 of the 5 years preceding the sale, you qualify for these deductions. 

Tax deductions on home improvements

All the money you poured into upgrades and maintenance to increase the house's value can be deducted from your tax bill. That includes: 

• Home office improvements

• Energy-efficient upgrades

• Maintenance

• Home office upgrades

• Renovations

• Home repairs

To qualify for these deductions, you must list home improvements and repairs as selling costs within 90 days of the closing. 

Tax deductions on property taxes

Property taxes are assessed annually. The amount is based on the value of the property. 

As long as you've been paying your property taxes up to the time the house is put on sale, you will qualify for up to $10,000 deductions on property taxes 😏

Ka-ching!

But remember, rules on property tax deductions change. Always check if the guidelines have changed.

Tax deductions on mortgage interest

That's right; you can get some deductions on the interest of your mortgage as long as you meet specific qualifications. Some things to remember: 

• Deductions of interest on mortgages are limited to $750,000 of mortgage debt under the 2017 tax code 

• Home sellers who got their mortgage before December 15, 2017, can deduct up to $1 million in interest on mortgages

• Property taxes and mortgage interests are itemized deductions and should be greater than the standard deduction 

Just like property tax deductions, rules could change for mortgage interest deductions. Always check if guidelines have been changed.

Bonus: tax deductions on capital gains tax

Technically, capital gains are not a deduction; it's an exclusion.

But just the same, they will reduce your tax bill - go get that bag!

Capital gains are profits you earn from selling a property. It is calculated based on the house's value, not the original purchase price. The profits are taxed, but you can exclude:

• Up to $250,000 of the capital gains if you're single 

• Up to $500,000 of capital gains if you're married

A house you bought for $200,000 and spent $50,000 on improvements would have a cost basis of $250,000. If you're single and sold the home for $250,000, you don't pay any capital gains taxes 💥

Two things to remember:

• The higher the property's cost basis, the smaller the tax bill becomes after selling it.

• Always keep the receipt of every upgrade you make for the house to take full advantage of this tax break. 

One caveat: You only qualify for the tax exclusion if you've lived in the house for at least 2 of the past 5 years. 

💫 What Else is Poppin? 💫 

Amazon Terminates iRobot Deal 🤖

^{The e-commerce giant was set to acquire the Roomba maker} 

The planned acquisition of Roomba maker iRobot by Amazon has been called off. According to representatives, both companies found “no path to regulatory approval for the deal.”

There were repercussions…

• iRobot CEO Colin Angle will step down effective immediately

• 31% of iRobot workers will be laid off after the deal fell through

• iRobot shares plunged 10% in the morning trading 

• Amazon will pay iRobot $94 million in breakup fee

The deal was dropped after prior reports that the European Union would not offer regulatory approval. 

The reason?

The EU Commission says the acquisition enables Amazon to reduce the visibility of iRobot rivals in its retail platform.

This could lead to restricted competition in the market, higher prices, lower quality, and fewer innovations.

Amazon announced the proposed acquisition in August 2022 to expand its stable smart home devices. iRobot was valued at $1.7 billion and had a market capitalization of under $400 million. 

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