The Tax Day Question Every Seller Should Ask

Tax Day often gets homeowners looking back over the past year and asking a simple question: did anything big change?

For a homeowner planning to sell, that answer is almost always yes.

Selling a home is one of the biggest financial events most people ever have, and the tax side is often an afterthought until it is too late to plan.

Here is the good news. Federal tax law lets many homeowners exclude up to $250,000 of gain from the sale of a primary residence, or up to $500,000 for married couples filing jointly, as long as they owned and lived in the home for at least two of the last five years. In San Diego, where many owners have seen significant appreciation, that detail matters.

Here is what to understand before you list:

Know Your Basis. Your gain is not just sale price minus purchase price. Qualifying improvements can raise your basis and lower your gain. Keep those receipts.

Mind the Two-Year Clock. Selling a few months before you hit the two-year mark can cost you the exclusion. Timing your sale around that date can be worth real money.

Rentals Play by Different Rules. If the home was ever a rental, depreciation and the timing of your move can change the math.

I am not a tax advisor, so talk with your CPA before you list. But ask the question early.

The market is fair, but it is not forgiving. The sellers who plan for taxes keep more of what they earn.

Next week, I am going to share the "Appraisal Gap" and what happens when the bank disagrees with your buyer.