Taxes When Selling & Buying a House

by Kristine Tucker, studioD

When you buy or sell a house, you must pay property tax on the real estate for the time that you actually owned the home. As a result, property taxes on a residence are split between the buyer and seller for the year the house was sold. Depending on the profit on the sale, as a seller, you could be assessed a capital gains tax. A home buyer is assessed non-deductible transfer taxes at closing. A seller is assesed tax-deductible excise taxes upon the sale of the home.

Property Taxes

Real estate taxes are assessed on a property on an annual basis. If you purchase a home, you must pay property taxes from the time of closing until the end of the year. As the seller, you must pay real estate taxes from January 1 until the closing date on the home. Both the buyer and the seller can deduct their portion of property taxes.

Capital Gains Tax

According to the Internal Revenue Service (IRS), you could be assessed capital gains tax on the sale of your home. As a single home owner, you must pay capital gains tax on your property if the profit from the home sale is more than $250,000. As married home owners, you must pay capital gains tax if the profit is more than $500,000. The capital gains tax limits apply each time you sell a home.

Transfer Taxes

As a buyer, you are assessed transfer taxes when you purchase your new property. The transfer tax is used to pay the costs of transferring the title from the previous owner's name to yours. You can request that the seller pay this tax as a portion of the seller's concessions at closing. According to the IRS, the transfer tax is not deductible.

Excise Taxes

As a seller, you are responsible for paying excise taxes at closing unless the buyer agrees to pay them. Excise taxes are county taxes that cover the administrative expense of recording the sale of the home. Some of the funds pay for local government public works facilities. Whoever pays the excise tax can deduction it.

About the Author

As curriculum developer and educator, Kristine Tucker has enjoyed the plethora of English assignments she's read (and graded!) over the years. Her experiences as vice-president of an energy consulting firm have given her the opportunity to explore business writing and HR. Tucker has a BA and holds Ohio teaching credentials.

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