Houston - House sell
Up to the 7th of May 1997 the only way to avoid paying taxes on the profit of the home sale was to use the money to purchase anothe one more expensive within two years. If the seller was 55 years old or older could take a once-in-a-lifetime tax exemption of up to $125,000 in profits. Tax Form 2119 had to be fill out to show diligence in all cases. It all changed when the Taxpayer Relief Act of 1997 became law.
The tax breaks available to homeowners are most notably mortgage interest and property tax deductions, but there is another added advange about homoeonership, in case of sale, of owing nothing to the Internal Revenue Service.
When selling your primary residence (it cannot be a property you bought for investment purporses) you can make up to $250,000 in tax-freeprofit if you're a single owner, double that if you're married. This means you do not owe any capital gains taxes.
Primary residence means that you have to have owned and lived in the home for two out of the five years prior the sale.
Closing costs
Closing costs are the various fees payable by either seller or buyer at the time of settlement (when the purchase of a property is finalized), or by a borrower when a loan is refinanced.
Buyer and seller will each have to pay a portion of the closing costs.
Closing costs include expenses such as points (points are charged by the lenders to originate the loan, 1 point = 1% of the loan amount; so a 200.000 usd mortgage with a 1.5% loan fee would increase your bill of 2.500 usd; the lenders that do not charge points may carry higher interest rates), taxes, title insurance, mortgage insurance and attorney's fees.
Typically, buyers pay costs associated with:
- obtaining a mortgage,
- house inspections,
- homeowner's insurance
- title insurance
- loan origination fee (you will receive more specific information about types and amounts of
closing costs applicable to your transaction, when you apply for a loan)
Sellers may be responsible for fees associated with:
- a loan pay-off
- title insurance and all or part of any transfer taxes.
Beware that it is important to check if, based on the location where the transaction is taking place, there are additional closing fees for the parties.
The seller will pay the real estate agency a percentage of the sale.
More in depth info about property tax in Texas can be found here
