When is the best time to sell your home when considering taxes

When considering selling your home, you have flexibility when it comes to moving, there are several details to contemplate before listing it for sale. 

The best time of the year to sell is determined by a number of factors including your personal finances, needs and the market. But according to the leading real estate marketplace Zillow, April through July offer better selling opportunities. However, this also depends on your location. The winter months tend to be more sluggish for home sales due to the holidays and cold weather.

Other factors that can effect when you sell your home are local economic conditions and the housing inventory in your area. In other words, is yours a seller’s or a buyer’s market?

Three important financial considerations that can help evaluate your situation in order to determine the best time to sell are:

  • Your home’s worth
  • The costs of selling your home
  • The tax considerations of selling your home

If your home has increased in value since you bought it, you could realize a significant profit from the sale. Unfortunately, capital gains tax could limit your windfall.

Capital gains tax can be complicated and there are “gray” areas when it comes to capital gains exclusions. Accountants that provide tax services can help you limit the liabilities of capital gains tax.

Your situation

The tax implications of selling a house are dependent on:

  • Ownership
  • Use
  • Timing 

If you have owned and lived in the home for a total of two of the five years before the sale, and it’s been your primary residence rather than an investment property, up to $250,000 of the profit is tax-free if you are single, or up to $500,000 if married and filing jointly.

If you are married, you must meet the following requirements to use the $500,000 exclusion:

  • One spouse must meet the ownership requirement
  • Both spouses must have lived in the house for two of the five years leading up to the sale

You are permitted to use this exclusion every time you sell a primary residence, as long as you have owned and lived in it for two of the five years leading up to the sale and have not claimed the exclusion on another home in the last two years. 

If the profit on the sale exceeds the $250,000 or $500,000 limit, the excess is generally reported as capital gains on your Schedule D. 

Finding the best time for you

Trying to determine the best time to sell a house or the best time of the year to buy a house is going to depend on your tax liability.

At GYL CPAs and Advisors, our expert team of accountants offers our clients accurate, accountable, and proactive tax planning and tax preparation.