Home values are on the rise again, and that means big taxes could be due for those who sell.
In some cities, especially in California, New York, and Massachusetts, home prices have increased smartly over the last decade, according to a story in the New York Times.
In those places, single homeowners with gains of over $250,000 and couples with gains of more than $500,000 could end up paying federal taxes of up to 23.8 percent on real estate gains over those amounts when they sell, the story says.
Additional state taxes might also apply.
If this is you, there is some paperwork you should start filing away and keep until you sell the home. This is the paperwork for any improvements you have made to your home. The cost of those improvements count against the gain. Even a single remodeling can offset the gains by into the six figures.
The number of affected individual is highest in cities with the greatest real estate gains. An estimated 20 percent of homes in Los Angeles could be affected, for example.
The story recommends getting IRS Publication 523: Selling Your Home. It lists all the things you can subtract from your gain. Additions count; repairs don’t.
If you live in a condo, your monthly condo fees or special assessments might count.
But you need receipts for every one of these things.
