As someone who is currently in the process of both buying and selling a home, I’m reminded how many moving pieces there are. Between inspections, appraisals, and closing dates, taxes may be the last thing on your mind. Still, a few smart steps can make a real difference when tax season comes around.

When You Sell Your Home

If you are selling your primary home, one of the biggest tax benefits available is the capital gains exclusion. You may be able to exclude up to $250,000 of gain if you are single or up to $500,000 if you are married filing jointly. To qualify, you must have owned and lived in the home as your primary residence for at least two of the last five years.  Your taxable gain is based on the selling price minus your adjusted cost basis. That means it’s worth keeping track of major improvements such as kitchen remodels, new roofs, or additions. These expenses add to your cost basis and can help reduce the taxable portion of your gain.

If you had to sell sooner than expected because of a job move, health reasons, or other qualifying circumstances, a partial exclusion might still apply; the IRS makes exceptions when life events force you to sell earlier than planned.

When You Buy a Home

Buying a new home also brings potential tax considerations. Homeowners who itemize deductions may be able to claim mortgage interest and property taxes. Under the new 2025 tax legislation, the cap on the federal deduction for state and local taxes was raised to $40,000 (up from the prior $10,000) for most taxpayers. For taxpayers with modified adjusted gross income over $500,000, the cap will phase down. Current tax law also limits deductible mortgage interest paid up to $750,000 of mortgage debt that was used to buy, build or substantially improve your home.

If you paid discount points to lower your interest rate, those may be deductible in the year you bought your home if certain IRS guidelines are followed.

Owning Two Homes Temporarily

In today’s housing market, it is common for buyers to close on a new home before selling their current one. If you find yourself in that situation, you can generally deduct mortgage interest on both properties if the combined loan amount stays within the limit. Property taxes for both homes are tax deductible, and with the new $40,000 cap on state and local taxes, many homeowners will see a greater benefit than before. This higher cap can make a noticeable difference for those who temporarily own two properties or live in areas with higher property taxes.

If you rent one of the homes out temporarily, keep detailed records of income, expenses, and any days you personally use the property. That information can become important if you later sell the home and need to calculate depreciation recapture or determine eligibility for the home sale exclusion.

Other Considerations

If you’ve used any part of your home for business purposes or as a rental, a portion of your gain could be taxable due to prior depreciation. Each state also has its own rules for property taxes, homestead exemptions, and portability, so check your state’s requirements when moving.

Finally, timing matters. The date you close can affect which year you can deduct mortgage interest and property taxes. If you’re close to year-end, you might want to review the timing with your lender or CPA before finalizing your closing date.

Final Thoughts

Buying or selling a home can be one of the biggest financial decisions you make, and taxes are an important part of that picture. Staying organized, keeping your closing documents, and understanding the rules can save you both time and money later. Speaking from experience, keeping an eye on the taxes early in the process helps make the move a little smoother and the paperwork a little less stressful when tax season arrives.

It’s always a good idea to stay in touch with your CPA throughout the process. Discussing these decisions ahead of time can help ensure you are prepared when it’s time to file your return.

Published in the Victoria Advocate.

Megan Williams, CPA is a Senior Staff Accountant for Keller & Associates CPAs, PLLC.