22 Jan Important Tax Documents For Home Sellers
Tax season is right around the corner, and if you have recently sold your home, you’re acutely aware of the mountain of paperwork that comes with it. Tucked within that stack of paperwork are some important tax documents that you will need when it’s time to file. These items will also come in handy if you get audited.
Remember that everyone’s situation is unique, so be sure to consult with a CPA or tax professional for their expertise. Here is a closer look at what you may need:
- Form 1099S- Reporting Capital Gains: This document will arrive in the mail, and it’s essential to set it aside in a safe place. This form essentially is proof to the IRS that you sold your home. If you aren’t required to pay capital gains taxes on the sale of your home, you may not receive this form.
- Form 1098- Mortgage Interest Payments: This will arrive by mail and details the amount of mortgage interest you have paid during the year. If you don’t qualify for a full exclusion, the interest you have paid can be added to your cost basis to help lower your tax burden.
- Closing Statement: Think of this as the receipt of your home sale. The settlement statement, HUD-1, or closing disclosure statement details the costs incurred during your home sale.
- Records/Receipts To Establish Cost Basis: Reducing your home sale tax liability is the objective, and invoices and receipts from home renovation projects are evidence you should keep. This includes DIY projects, too, for things like materials and permits.
- Documentation Of A Work-Related Move: If you sold your home due to a work-related move, you should qualify for the full capital gains tax exemption provided you lived in the home for more than two years. And if it’s been less than two years, you may still qualify for a partial exemption.
- Proof The Home Was Your Primary Residence: To benefit from the capital gains tax exclusion, one of the most important qualifications is that the home was your primary residence for two of the past five years. Things like bank statements, utility bills, tax returns, and voter registration with your home address can provide proof the home was your primary residence.
Again, consulting with your CPA or tax specialist can help you determine exactly which documents you will need this year. So, give them a call soon to get everything organized for a stress-free filing this year.
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