Bought or sold this year? A few tax items worth knowing before December 31.
Real estate transactions generate tax implications that most buyers and sellers don't think about until their accountant asks the right question in March. Getting ahead of this before year-end is worth the effort.
On the buying side: property taxes paid at or after closing, mortgage interest, and certain closing costs may be deductible. The deductibility of real estate taxes is subject to the $10,000 SALT cap established in 2017, which affects some Houston buyers more than others depending on their overall tax picture. Your HUD-1 or closing disclosure has the numbers your CPA needs.
On the selling side: if the property was your primary residence for at least two of the last five years, you may exclude up to $250,000 in capital gains ($500,000 for married couples) from taxable income. If the property was investment or rental, the tax picture is different — depreciation recapture is a real consideration that surprises people.
The documents to have ready: your closing disclosure from both purchase and sale, any records of capital improvements made during ownership (these increase your cost basis), and your original purchase records. Your CPA will ask for all of it.
Your CPA will ask about your closing date, your HUD, and your cost basis. Knowing where to find those documents before April is more useful than knowing where to find them in April.
Tax treatment of real estate transactions involves federal and state law that changes frequently. This reflects general awareness, not tax advice. Consult a qualified tax professional for guidance specific to your situation and tax year.