🏡 how to legit skip taxes on a home sale
Q&A: Should I get a mortgage or save all cash to buy a home?
Featured Artist: Alisa Lariushkina
Here’s what’s in today’s newsletter:
💰 Main Topic: How to legit sell your home tax-free!
❓ Q&A: Should I get a mortgage or save cash to buy a home?
🗞 In the News: Stay up-to-date on financial headlines.
😎 What I’m Enjoying: A TV series, kitchen tool, and new book.
🎙 Recent Podcasts: Dig into 929+ episodes in the Money Girl archive.
🤣 Favorite GIF: Reply with your favorite GIF—it might get featured!
Hi, Friend — I hope you’re having a wonderful Memorial Day weekend! I’m enjoying it with some tennis games, good food, and a great book (see below).
Taxes are likely the largest expense you’ll pay during your lifetime, so why not take every legitimate opportunity to reduce them?
One of the largest potential tax breaks happens when you’re fortunate enough to sell a home for a profit. This week on Money Girl 928, Selling Your Home—How to Avoid Capital Gains Tax, I review the rules and who qualifies for the capital gains tax exclusion.
If you’re unsure how a home sale gets taxed, here are four steps to determine your capital gain or loss when you sell a residence.
1. Calculate your basis.
This is your total investment in your property, including the purchase price, closing costs, and any capital improvements that increase its value. Certain items, such as allowable depreciation and payments received for home insurance claims, decrease your home's basis.
2. Determine your realized amount.
This is your home's selling price minus related expenses, including a real estate sales commission and closing costs.
3. Calculate your capital gain or loss.
When you subtract your home's basis from your realized amount, you have a capital gain or loss. For instance, if your home's basis is $400,000 and you realized $450,000 from its sale, you have a $50,000 capital gain.
4. Determine your capital gains tax rate.
This depends on your income, tax filing status, and the length of time you owned the property.
👍 However, you may qualify to exclude some or all of your home sale gain from your taxable income. It must be your primary residence, and you must have owned and lived in the home for at least two of the five years preceding the sale.
If you qualify, you can exclude up to $250,000, or $500,000 if you file a joint tax return, of capital gain from selling your primary home. That’s a massive tax savings!
As always, you can listen to the podcast 🎧 or read the transcript 📙 to learn more.
❓ On Finance Friday podcast episodes, I answer your money questions! This week’s topic comes from Sandy from Hopkinsville, Kentucky, who says:
"I'm 31, max out a Roth IRA, have a 6-month emergency fund, and no debt. I have about $1,000 left each month, and I want to invest it in diversified ETFs in a brokerage account. I'm looking for at least a 7% return over the next ten years, which would allow me to pay cash for a house.
I don't want to pay interest to a lender when I can get the interest instead. I plan to live in the house and flip it, claiming the capital gains tax exclusion after five years. But I'm in no rush if the housing market is down in ten years.
Should I pay cash or get a mortgage for a home?"
On 🎙 Money Girl episode 929, Should I Get a Mortgage or Save to Pay Cash for a Home?, I review the pros and cons of getting a mortgage to buy a home sooner or waiting to pay all cash later.
You can listen to the podcast 🎧 or read the transcript 📙
🗞 Domestic and international flight costs are down to some cities this summer, especially if your timing is somewhat flexible. Fuel costs are down, the number of flights is up, and fewer people are traveling right now, making this a great time to shop for airfare if you haven’t already booked a trip.
➡️ TAKEAWAY: Consider purchasing travel insurance to protect yourself against potential losses. Also, remember that health insurance typically doesn’t cover you overseas, so a travel policy with medical coverage can be a literal lifesaver!
🗞 This survey says Portugal is where Americans want to move most based on preferences such as the weather, local policies, and cost of living. Two-thirds of respondents want to leave the U.S. by 2026, with 12% planning to move within the next six months.
➡️ TAKEAWAY: Whether you want to move to a new city, state, or country, consider renting there first to try it out for a month or two before making any significant financial decisions, such as selling a home or quitting a job.
🗞 Mortgage rates crept up to an average of 6.86%, but remain lower than this time last year.
➡️ TAKEAWAY: The number of mortgage applications is higher due to stable mortgage rates and an increased number of homes on the market. I still believe we won’t see significant rate movement, so this summer could be a popular time to buy a home.
🎬 Nine Perfect Strangers is an interesting, dramatic Hulu series in its second season, based on the novel of the same name. Nicole Kidman stars as Masha Dmitrichenko, the Russian founder of a wellness spa, which promises to transform its guests. However, the resort isn’t what it appears to be. The nine guests discover secrets about each other and Masha after they’re all given microdoses of psychoactive drugs without their knowledge.
🧄 This heavy-duty garlic press is the best I’ve ever used, and I always choose it over mincing. You can press multiple cloves, leaving the skins behind. Then, flip the top handle over to use the built-in cleaner to push out the leftovers and rinse clean.
📚 Year of Wonders: A Novel of the Plague is the newest read that I’m enjoying so far. It’s inspired by a true story of an isolated village in the English countryside in 1666 when the plague arrived. Author Geraldine Brooks creates a housemaid heroine, Anna Frith, who is an unlikely healer. She struggles to survive and grow during a catastrophic year of disease, superstition, and witch-hunting.
🎧 929: Should I Get a Mortgage or Save to Pay Cash for a Home?
🎧 928: Selling Your Home—How to Avoid Capital Gains Tax
🎧 927: Should I Get a Home Equity Investment Loan?
🎧 926: Social Security’s Future—Fact vs Fiction With Bill Rainaldi
🎧 925: Retirement Accounts Explained—5 Types You Should Know
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