Selling house

[Am076]

I am Selling a home in Colorado I lived in the house for 22 years and the last 12 years. It has been rental property. When I close on the property in 2025 will Taxes be deducted immediately from the net proceeds from the sale Or will I pay the taxes when I file in 2026?

[AmyC · Accepted solution]

The IRS expects payment the same quarter you make the money. You will most likely need to make a Payment at that time. If you owe the IRS over $5,000 at tax time, you automatically receive penalties and interest for the substantial underpayment.

You may want to go through the estimated payments section of the program to help you prepare for the sale of the house.

You can make a payment to CO Payments | Department of Revenue - Taxation.

Great job planning ahead.

[Am076]

Amy, THANK YOU for replying & answering my question.  

Am I able to do the deductions for home improvements over the past years the house was leased out?  & 

Am I able to deduct the improvement amounts from the sale proceeds before paying any taxes to IRS or Colo? 

If I’m purchasing another home with the sale proceeds will taxes still need to be paid within the quarter that the home is sold?

[RobertB4444]

If you have not deducted the home improvements as lease expenses during the period that it was rented out and you did not depreciate those improvements then you can add the amounts that you spent to your basis in the home when you sell it.  Be certain that you did not already deduct those amounts.

If you had not already deducted those amounts they add to the basis on the home.  The basis is what you paid for the house.  That and any selling expenses are deducted from the sale price when figuring what your profit on the sale is.  Your profit is what you will be taxed on.  So yes, they will be deducted before figuring the taxes due.

Yes.  Purchasing another home with the proceeds has no effect on the taxes due from the sale unless you are doing a 1031 exchange which requires that you use a 1031 exchange professional to hold the money for you prior to the purchase.

Here is some information on 1031 exchanges.

@Am076