Selling a home in North Texas can be a profitable milestone—especially if you’ve built up equity over the years. But did you know you might also be eligible for valuable tax deductions? Knowing which expenses you can deduct can help lower your tax burden and preserve more of your hard-earned proceeds.
If you paid mortgage interest during the year you sold your Texas home, you may still qualify to deduct that interest on your federal return.
Under current IRS rules, the deduction applies to interest on mortgage debt up to $750,000 for couples filing jointly ($375,000 if filing separately). That limit was reduced from $1 million following the 2017 Tax Cuts and Jobs Act.
Because the standard deduction has increased significantly, many sellers choose not to itemize. However, if your itemized deductions exceed the standard amount, this deduction may still be worth it—especially if you had a second mortgage or home equity line of credit (HELOC). Just make sure your total eligible mortgage interest stays within the allowed limits.
In Texas, homeowners typically pay property taxes annually based on county assessments. If you sold your home during the year, you can deduct the portion of property taxes you paid up to the IRS limit of $10,000 in combined state and local taxes (SALT), including income or sales tax and property tax.
Since Texas doesn’t collect state income tax, most of that SALT deduction will come from your property tax bill. Remember, this deduction is only helpful if you itemize rather than take the standard deduction.
If the home you sold was your primary residence for at least two of the last five years, you may be able to deduct certain costs related to the sale. These can include:
To benefit, you won’t list these items as individual deductions. Instead, subtract them from your home’s sale price, which reduces your taxable capital gains. Be sure to keep records of all out-of-pocket expenses tied to the sale.
If you made repairs or upgrades specifically to help sell your Texas home—and completed them within 90 days of closing—some of those costs may reduce your tax liability.
Here’s the difference:
To qualify, improvements must be completed before closing, and you’ll need proper receipts and documentation.
As of 2018, most taxpayers can no longer deduct moving expenses. However, active-duty military members who relocate due to official orders can still claim this deduction.
Eligible moving expenses may include:
If you’re active-duty military selling a home in Texas due to reassignment, be sure to file IRS Form 3903 to claim this deduction.
Texas doesn’t tax capital gains, but you may still be subject to federal capital gains tax if you make a significant profit on the sale. The good news? You might not owe any tax at all, thanks to the capital gains exclusion.
You can exclude:
To qualify:
Even if you don’t meet the full requirements, you might still qualify for a partial exclusion due to a job move, divorce, or health reasons. Special rules also apply for military members stationed away from their primary home.
Texas does not have a state income tax, which simplifies things for residents. However, if you paid any taxes related to the sale—such as transfer taxes or county recording fees—you may be able to include those as itemized deductions on your federal return.
Because rules can vary depending on your exact location and tax situation, it’s wise to consult a local CPA or tax advisor familiar with Texas real estate transactions.
