Tax implications of selling a home in Boise, Idaho
Selling a home ranks right up there as one of the most stressful life experiences you can have. Getting your home ready to put on the market, keeping it tidy for home showings, and managing the prospect of making two house payments each month (one on the house you’re selling and another on the house you’re moving into or already own) – it’s enough to make even the most easygoing person lose sleep.
Do your homework
Given that selling a home can cause substantial headaches, it’s a good idea to become as informed as possible about the issues you are likely to encounter during the process. That means understanding the tax implications of selling a home, as well as how to sell a home fast.
First, let’s explore the tax issues around a home sale. Whether your home is inherited or not, be prepared to pay both federal and state taxes on the sale. Your tax liability is calculated from the home’s basis. That’s the value of the house at the time of the sale, and it’s the number that is used to determine your capital gains or losses – the amount you will need to pay based on when you sell your property.
Here is an example of how tax basis is calculated. Suppose that 30 years ago, you purchased a home worth $100,000. Today, that home is worth $375,000. Your tax basis is $375,000, and you would calculate your tax liability by subtracting the home’s original value ($100,000) from its current value ($375,000), and then multiplying by the applicable tax rate.
There is one major exception to these calculations that could significantly benefit you when you’re selling your home. Under federal tax law, if you report a capital gain from selling your home, you can take the first $250,000 of that gain as a tax deduction ($500,000 if you are married filing jointly). That means that if you’re selling your home, you only have to pay taxes on any profit over $250,000 (or $500,000 for married couples.)
Calculating tax basis on an inherited home
Importantly, if you have inherited a home you are now looking to sell, your tax basis is calculated not from when the home was first purchased, but from when you first inherited it. This is called the “step-up basis.” For example, suppose that six months ago, you inherited your parents’ home, at which time it was worth $200,000. Thanks to a remarkably robust real estate market, the house is now worth $250,000. When you sell the home, you are only liable for the amount it has appreciated since your loved one’s death (in this case, $50,000).
Capital gains tax rates
Assuming you owe taxes on the sale of your home, how much can you expect to pay? Federal and state capital gains tax rates are based on income. In most cases, the federal tax rate on capital gains is 15 percent. In Idaho, the tax rate ranges from 1.6 percent to 7.4 percent. Keep those numbers in mind when you’re in the process of selling your home. Of course, the best thing to do when considering the tax implications of selling a home is to consult a tax professional, who can provide guidance and advice tailored to your specific situation.
Ways to sell your home
As you can see, selling your home can be a complicated process, and there are different methods for how to sell a home fast. The most traditional, of course, is to work with a real estate agent. A qualified agent can help you in several important ways, by:
- Providing expertise on needed repairs or upgrades to maximize your home’s value
- Determining the appropriate sale price by analyzing current trends and similar homes
- Marketing the home to potential buyers
- Negotiating the best offer
- Ensuring a smooth closing process.
However, there are disadvantages to hiring a real estate agent to handle the sale of your home. Some of the downsides include:
- Having to pay a commission fee
- Not having individualized attention
- Not working directly with the buyer
- Giving up control of the process, including the timeline and your target sale price.
For sale by owner (FSBO)
If you don’t want to use a real estate agent to sell your home, you have other options. For instance, you could sell it yourself, a process known as “for-sale-by-owner” (FSBO). FSBO is ideal for people who want to save on commission fees and have more control over the process, including the price and the timeline. The downsides of using FSBO to sell your home are considerable. For one thing, it requires you to do all of the work yourself, including taking photos of your home and marketing it, hosting open houses, negotiating with buyers, and hiring an attorney to draw up the required paperwork. For many home sellers, the money they save on commission isn’t worth all of the time it takes to handle the sale on their own.
Selling to a real estate investor
If you’re exploring how to sell a home fast, another option is to use a real estate investor. Home buying companies can often take the hassle out of the whole process. Here are some advantages of selling your home to an investor:
- Having a cash buyer: Often, real estate investors are willing to pay cash for your home, cutting a lot of the red tape around financing agreements. That means you get the money for your home upfront.
- Quick closes: Since investors often pay cash up front, you don’t have to wait for financing to come through. That means you can close the transaction faster than if you worked through a traditional buyer. Selling your home more quickly means you can move on with your life and not have to worry about having two house payments.
- Selling as-is: A real estate investor is often willing to buy houses that are in need of serious repair. That saves you the time and expense of making improvements to a home you’re not even planning to live in.
If you’re planning to sell to a real estate investor, be aware that there are a lot of home buying companies out there, and not all of them are reputable. Do your due diligence and only work with licensed investors. If you are looking to sell your home fast and for a great price, we can take the hassle out of the process, so give us a call or send us an email today. We’d love to know more about your situation and how we can help you.
If you find yourself facing foreclosure and unable to find tenants or maybe just inherited a home, in any case, we can help you sell your home in Boise in 7-10 days. If you’re thinking of selling and are exploring your options, consider selling directly to us.
Call our team at (208) 214-3365
If you don’t want to go through the hassle and headache of selling to the market, then we might be able to help. We’ll give you a quick call once we find out a bit more about your property in Idaho, and make you an offer on your home the same day.