by Hope
Being here in Texas with my whole family has really pushed my desire to leave my lonely existence in my tiny town in Georgia behind. However, I know I must weight the post-move repercussions.
To Sell or Not to Sell
After everyone left, my dad is really encouraging me to make the move. Despite my pushback that I would not be ready to purchase another home, I don’t know where I want to be long term, and the increased cost of living in this area, he still thinks it is the best move this next year. (He’s also convinced that all my kids will end up in this area eventually, which I can’t argue with.)
Recently, I had an experienced real estate agent walk through my home, and let me tell you, the numbers she tossed out left me both giddy and cautious. Not to mention, she was very impressed with the upgrades and renovations I’ve done to the house.
According to her estimates, I could at least double my initial investment if I sold my house right now. That kind of profit is life-changing for me. But before I mentally spent the windfall, I knew I needed to understand the tax implications of such a decision. Spoiler: they’re not as simple as they seem.
Here’s what I learned and how I’m navigating the financial and tax considerations of potentially selling my home.
Capital Gains and What They Mean for Me
When you sell a house for more than what you paid for it, the IRS considers that profit a capital gain. In my case, since I’d stand to make a significant profit, I needed to understand how much of that would be taxed and at what rate.
- Primary Residence Exclusion
One of the most critical pieces of information I discovered is that if you’ve lived in your home as your primary residence for at least two of the last five years, you can exclude up to $250,000 of profit from taxes if you’re single (or $500,000 if you’re married and filing jointly). That means, I am safe. My house will not sell for anything close to $250,000. I purchased it for $90,000 so right now I anticipate coming in right around $100,000-ish in profit. - Long-Term Capital Gains Rates
Any profit above the exclusion amount is taxed as a long-term capital gain if you’ve owned the property for more than a year. The rates vary depending on your income: 0%, 15%, or 20%.
Evaluating My Options to Minimize Taxes
Even though it will not affect me, I felt it was important that I understand everything. We all know that my ignorance has been a bone of contention for BAD readers for many years. Trying to do better by deep diving.
Learning about the taxes encouraged me to look at steps I could take to lighten the tax burden if it were to be an issue. Here are a few strategies I would consider:
- Timing the Sale Strategically
If I sell the house in a year when my income is lower, I might qualify for a lower capital gains tax rate. Since my income fluctuates, this could make a big difference. - Tracking and Claiming Improvements
Did you know that certain home improvements can increase your cost basis (the original purchase price of your home), reducing the taxable gain? I’ve spent money over the years on renovations—like a new roof, upgraded kitchen appliances, and even landscaping—and I’m now digging through receipts to document these expenses. - Exploring a 1031 Exchange
This one is a bit trickier, but if you decide to invest the proceeds in another property, you might qualify for a 1031 exchange. This lets you defer paying capital gains taxes. This would require careful planning and the help of a tax professional. I actually worked on a few of these in 2023 when I spent the bulk of the year working for a local accountant. It’s a interesting concept and not too terribly hard to navigate. But if it did apply to me, I would most likely enlist an accountant to handle it to assure it was done correctly. - Charitable Contributions
I also learned that donating a portion of appreciated property to charity can provide a tax deduction. While this would probably not be my primary strategy, it’s worth considering if you want to combine a financial decision with a philanthropic one.
The Emotional Side of Selling
Beyond the numbers, deciding to sell my home is deeply personal. This isn’t just a financial asset; it’s the place where I’ve built memories with my family. Doubling my investment is enticing, but I’m weighing what leaving this chapter behind might mean emotionally.
My Next Steps
I’m not rushing into anything. Selling a home—especially one with the potential for a significant profit—requires careful thought, not just about what I’ll gain but also about what I might lose in stability. (I don’t think taxes will be a concern considering the lower cost of housing here, but overall, I believe this house has been a good investment both in the original purchase and the renovations I have done.)
I’ve started considering the cost of improvements I would most likely need to make to get the most money should I decided to sell. I want to make sure I understand the full picture and don’t leave money on the table.
If you’re in a similar boat, my advice is to:
- Understand your capital gains exclusion and tax rates.
- Document all improvements to your home.
- Seek professional advice.
Selling a house is a big decision, and taxes are just one piece of the puzzle. But knowing the rules (and how to work within them) can make the difference between a life-changing windfall and a surprise tax bill.
For now, I’m weighing my options and trying to make the best decision for my future. If I do sell, at least I’ll go into it informed and ready to make the most of this opportunity.
Hope is a resourceful and solutions-driven business manager who has spent nearly two decades helping clients streamline their operations and grow their businesses through project management, digital marketing, and tech expertise. Recently transitioning from her role as a single mom of five foster/adoptive children to an empty nester, Hope is navigating the emotional and practical challenges of redefining her life while maintaining her determination to regain financial control and eliminate debt.
Living in a cozy small town in northeast Georgia with her three dogs, Hope cherishes the serenity of the mountains over the bustle of the beach. Though her kids are now finding their footing in the world—pursuing education, careers, and independence—she remains deeply committed to supporting them in this next chapter, even as she faces the bittersweet tug of letting go.
Since joining the Blogging Away Debt community in 2015, Hope has candidly shared her journey of financial ups and downs. Now, with a renewed focus and a clear path ahead, she’s ready to tackle her finances with the same passion and perseverance that she’s brought to her life and career. Through her writing, she continues to inspire others to confront their own financial challenges and strive for a brighter future.
Did the realtor provide comparables? If not, I wouldn’t listen to the price she quoted until you’ve studied comparables. She may just be trying to get your business right now. Also, did she mention her commission? You have to deduct that from the purchase price. That’s how much money she is going to make off a sale. Also, I believe you paid $100k for the home.
What did she tell you to do to make the house as salable as possible?
I still think selling before paying off all your consumer debt and saving an emergency fund is a bad idea.
She is a family friend and not expecting to be my real estate agent. I asked her to come as a favor so the $$ motivation was not a factor at all in her evaluation.
Most realtors in our area (and VA where I came from) get 3%, so I’ll be out 6% for the buyer and seller realtor if I do use a realtor.
Must do items: repair kitchen ceiling (a post about that is coming), refinish original hardwood floors (getting a quote on that when I return,) and paint window trim white (I would do that myself.)
If you do decide to sell, be sure you have your numbers right. You say here that your loan amount is for $98k and you paid $95k. I’m not sure where the $90k amount is coming from. https://www.bloggingawaydebt.com/2021/07/about-the-house/
Just a head’s up, you can’t do a 1031 exchange on a primary residence.
It’s not really a factor for me, just came up in my research and I had some familiarity with it since doing it for several clients at the accounting office I worked at for the bulk of 2022.
Capital Gains tax? It’s a primary residence you’ve been in for more than two years. You won’t have to pay that.
Yes, and it’s not worth enough to even consider. Just wanted to make sure as I evaluate options that I know all the facts and go into this decision with my eyes wide open.
Have you considered checking zillow for both how much you paid and how much your home might be worth? Also, with your mortgage being over $1000, it seems like you might have taken out a cash-out refinance when you were behind on your mortgage? That would impact these numbers.
I have checked Zillow. I paid $90K for the house and according to Zillow, it’s worth double that.
I don’t know how reliable Zillow is, but even at just double, I would walk away with a significant amount after realtor fees.
Houses on my street, smaller, less updated are selling for 15-20% more than that as recently as this month.
No decision made, but $$ seem in my favor as far as the basics go.
Asking the question again – did you refinance and take extra cash out? Is this why your mortgage has increased so dramatically?
you will never get an answer.
Never.
Capital gains from a primary residence aren’t taxed unless you hit a certain dollar amount which I can’t imagine you’ll hit. It’s like you did a lot of “research” without the most basic piece of information.
Your life has been very unstable and before losing the one stable thing you’ve had—housing—it sounds like you want to walk away and into a market where it would be hard for you to ever afford anything. This seems like a really bad plan given where you are.
Yes, I learned that from my research. My house is nowhere close to the $250K threshold.
It’s not about wanting to walk away. It’s about making the best decision for me and my life. That has been the struggle for the last two years, figuring out what that life is going to look like now that everything I had planned, thought has fallen apart.
Most likely none of my children will return to this tiny town. And best guess, only Beauty will stay in the state long term. Lots of unknowns, variables, and things I am considering as I evaluate my next move.
Just trying to be well informed on all fronts. I said 4 years ago, I wouldn’t leave the state until Princess finished college. That happens in May…
You need a second opinion, and that realtor needs her eyes examined. With what you’ve shown of your “renovations”, you’ve just created problems that will need to be fixed by another buyer. Either that real estate agent is insane, blind, or your “tiny town” has a severe housing shortage.
I find all the feedback on my home improvements pretty funny. Maybe I just don’t look at my pictures the way you do. But the house is pretty amazing. The only item I agree most people can’t appreciate is my open shelving in my kitchen, I get that. It’s an acquired taste for sure.
But going from sticky tile linoleum to real tile throughout the laundry room, dining room and bathrooms. Going from 1 1/2 very dated bathrooms to two full modern baths with real tile, upgraded and full sized vanities, subway tiled showers and both, updated lights. Going from a very closed off house with door ways everywhere to an open concept living space that makes it seem so much larger than it is and so on. I honestly (and anyone who has visited my house) can’t see why you all can’t appreciate any of the many, many updates we made. It is all well done and much improved from 60s original as it was when I bought it.
But to each their own.
Your kitchen is an eyesore. The walls are painfully yellow and there aren’t even any cabinets. No one except you wants to see all their food, cleaning supplies, etc on permanent display. And no one wants a bathroom with a barn door.
you paid 95k, but it was appraised at 130k, and you said the current market value is double, so 95k times 2 =190K, that means that its value has gained 60k. 60/130=46% gain. you probably do not have too much equity since you put 3.5k down. In 4 years the value has gone up 46%? seems impossible since in 2021: House prices surged by an unprecedented 18%1. 2022: The growth rate slowed to 4.8%1. 2023: Prices increased by 6.5%
I cannot believe your numbers.
so your profit is 95k, minus real state commissions, will means a profit of 85k, minus the cost of improvements, so lets say 80k. what will you do with that money? pay debt? buy another house?
There are places where the market has gone up as much as Hope is saying at the lower end of the market. Doesn’t mean it’s a good idea to sell and never be able to buy anywhere again!
There are places where the market has gone up as much as Hope is saying at the lower end of the market. Doesn’t mean selling is a good plan!
Your wording on the capital gains exclusion requires a little clarification. $250k in gains what is untaxed for a single person, your post reads like if a house sells for over $250k it is subject to the tax.
A few other notes – buyers don’t want to come into a house and see some project that they immediately need to tackle. Paint is cheap and painting doesn’t require a ton of skill. Paint the walls.
Real estate commission structures are no longer a standard 6%, split between the buyer and the seller. You need to have a discussIon with your eventually agent on if/how to pay the seller’s agent.
Finally, I just returned to reading this blog free taking a long break. I have been around reading since Tricia started it. Your journey has been so difficult to watch, and the progress has been hindered multiple times. Please get some therapy. You have had some hard knocks along the way, but you also make some choices that bring more upheaval than peace. Developing an understanding of those patterns may not break them, but we all benefit from additional self-awareness.