Buying, Owning & Selling a Home: The Tax Moves Every Homeowner Should Know in Today’s Market

Understanding the Tax Side of Homeownership in Today’s Real Estate Market

Navigating today’s real estate landscape is challenging enough with fluctuating interest rates, competitive inventory, and shifting buyer trends. Add taxes into the mix, and even seasoned homeowners can feel overwhelmed. Whether you’re planning to purchase, currently own, or are considering selling, understanding tax implications can help you maximize savings and avoid unnecessary surprises.

Below is a breakdown of key tax considerations at every stage of homeownership in the current market.

When You’re Buying a Home: What to Expect at Tax Time

Mortgage Interest Deduction

For many buyers, the biggest tax advantage comes from deducting mortgage interest. While the Tax Cuts and Jobs Act capped deductible loan amounts, most buyers still benefit—especially in early years when interest payments are highest.

Property Tax Deductions

You may deduct state and local property taxes, though they’re combined under the $10,000 SALT (State and Local Taxes) cap. In high-tax states, this cap can limit savings, so planning ahead is key.

Points Paid at Closing

If you paid discount points to secure a lower interest rate, you may be able to deduct them in the year you bought the home.

While You Own the Home: Annual Tax Breaks & Responsibilities

Home Office Deduction (If Applicable)

Remote work remains common, and qualifying homeowners who use part of their home exclusively for business may write off related expenses. Rules differ for employees vs. self-employed individuals, so make sure you meet IRS criteria.

Energy-Efficiency Tax Credits

If you upgrade your home with solar panels, high-efficiency HVAC systems, upgraded insulation, or energy-efficient windows, you could qualify for valuable federal tax credits—and many states offer additional incentives.

Adjusting Your Cost Basis Over Time

Improvements—not repairs—can increase your home’s tax basis, reducing capital gains when you sell. Keeping good records of improvements pays off later.

When It’s Time to Sell: Minimizing Taxes & Maximizing Proceeds

Capital Gains Exclusion

One of the biggest tax perks in real estate is the home sale exclusion. If you’ve lived in your home for at least two of the last five years, you can exclude up to:

• $250,000 in gains if single
• $500,000 if married filing jointly

In a market where many homeowners are seeing substantial appreciation, this exclusion can save tens of thousands.

Reporting Requirements

Even if your gain is excluded, your sale may still be reported on Form 1099-S. Be prepared to document your cost basis, improvements, and time lived in the home.

Selling a Second Home or Investment Property

Vacation homes, rentals, and investment properties follow different tax rules. Capital gains apply, depreciation must be recaptured, and 1031 exchanges may be an option if you’re reinvesting.

The Bottom Line

Homeownership brings financial benefits beyond building equity—but tax implications can significantly impact your overall cost and your long-term returns. Planning ahead, keeping records, and understanding how federal and state tax laws affect your situation can help you make smarter decisions in today’s evolving real estate market.

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