Sold my house recently - 2 questions

[cmash]

Hi I sold my house recently for $540,000. How do i file the tax and also save from my tax breaks? I had expenses on the house - home improvement i had a fence put up and so on.

I also have a question on cash donation. I donated $5k to a temple charity. What i need to do. Thank you

[xmasbaby0]

SALE OF HOUSE

If your gain was more than  $250,000 filing Single, or more than $500,000 filing Married Filing Jointly the sale must be reported on your tax return.  Whether you re-invested the gain in to another house is irrelevant.  If you  have a Form 1099-S go to Federal>Wages and Income>Less Common Income>Sale of Home (gain or loss)

If you owned and lived in the home as your primary residence for at least 2 of the last 5 years on the date of the sale, you do not have to report the home sale if the gain is less than $250K filing Single, or less than $500K filing Married Filing Jointly (and you both owned and lived in the home for at least 2 years).

• If you are using online TT, you need Premium software to report the 1099-S

NOTE:   If you have ever used the home as rental property or claimed a home office, you have more information to enter

A charitable donation almost never changes your tax due or refund all by itself.  First, your donation does not count "dollar for dollar"--it is calculated by a percentage based on your tax bracket.  You need a LOT of other itemized deductions like mortgage interest or property taxes, medical expense, etc. to itemize and exceed your standard deduction.

Your itemized deductions have to be more than your standard deduction before you will see a change in your tax owed or tax refund.  The deductions you enter do not necessarily count “dollar for dollar;” many of them are subject to meeting  tough thresholds—medical expenses, for example, must meet a threshold that is pretty hard to reach. (Only the amount that is MORE than 7.5% of your AGI counts)   The software program uses all the IRS rules that apply to the expenses you enter, and it tells you if you have enough to use your itemized deductions or if using the standard deduction is more advantageous for you.  Under the new tax laws, some deductions have been capped—there is a $10,000 limit to the itemized deductions for state, local, property and sales taxes.

Your standard deduction lowers your taxable income. The standard deduction makes some of your income “tax free.”  It is not a refund.  

2024 STANDARD DEDUCTION AMOUNTS

SINGLE $14,600    (65 or older/legally blind + $1850)

MARRIED FILING SEPARATELY $14,600    (65 or older/legally blind + $1500)

MARRIED FILING JOINTLY $29,200    (65 or older/legally blind + $1500)

HEAD OF HOUSEHOLD $21,900    (65 or older/legally blind + $1850)

[cmash]

Since I sold my house and living in a rental now, do i have to report that?

[xmasbaby0]

@cmash

RENT

There is not a rent deduction or credit on your Federal return.  If your state has anything for renters you will be prompted to enter your rent info when you complete your state return.  As far as I know, the states that have anything for rent are Arizona, California, Connecticut, Hawaii, Indiana, Iowa, Maine, Maryland, Massachusetts, Michigan, Minnesota, Missouri, New Jersey, New York, Rhode Island, Vermont, Washington DC, and Wisconsin.

https://www.rent.com/blog/states-with-a-renters-tax-credit/

https://states.aarp.org/montana/dont-overlook-homeowner-renter-tax-credit

[KNDavis]

Hi cmash!

You'll report the sale of your home on your 2024 tax return.  You probably received a 1099-S after the sale closed.  Even if you didn't receive this form, you'll want to include the sale on your tax return.  TurboTax asks you all the necessary questions to correctly calculate the gain or loss.

If this home qualified as your primary residence, you can exclude the gain on the sale up to $250,000 if you're single or $500,000 if you're married filing joint.  If there is gain more than the $250K/$500K, then that portion will be taxed as capital gains. 

In order to exclude the gain, you (and your spouse) must have lived in the home for two out of the past five years.  You can exclude the gain on sale of your primary residence once every two years.   If you have a loss, you aren't able to claim that loss.

You calculate the gain by comparing the sales price, less expenses of the sale, to your cost basis.  Cost basis includes the original purchase price, plus any capital improvements you made to the property. The fence you mentioned would be an improvement to add to your purchase price.

For the cash donation, you can claim that as an itemized deduction.  If your total itemized deductions exceed the standard deduction, you will choose to itemize and be able to get a tax benefit for that donation.  You'll want to make sure the charity is a qualified tax exempt organization.  You can verify this at  IRS Exempt Organizations Select Check.  You'll need a letter or receipt from the charity confirming the donation and that you didn't receive anything of value in exchange.  For 2024, charitable donations are limited to 60% of your Adjusted Gross Income (AGI).  

Thanks for participating in today's Ask The Expert event!

Kimberly, CPA for over 30 years