What tax implications should I know about when selling and buying at the same time?
Answered by Chris Deutsch, Founder & Editor
Licensed Minnesota Realtor #20382264 ·
The short answer
This isn't tax advice — I'm a Realtor, not a CPA. But here are the tax considerations I see come up most often in buy-sell combos. Talk to a tax professional for your specific situation.
On stage The 60-second answer
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The longer answer
Capital gains exclusion. If you've lived in your current home for 2 of the last 5 years, you can exclude up to $250,000 in capital gains ($500,000 for married couples). This is the biggest tax break in residential real estate.
What counts as a capital improvement. When calculating your cost basis (which reduces your taxable gain), you can include:
- Major systems replacement (roof, HVAC, electrical)
- Room additions
- Landscaping that adds value (not just maintenance)
- New windows or siding
Keep receipts. All of them. For as long as you own the home.
Property tax reassessment. Your new home will be assessed at the purchase price. In Minnesota, this means your property taxes could be higher than the previous owner's if the home's value has increased significantly.
Mortgage interest deduction. If both transactions close in the same year, you may have deductible mortgage interest on both homes. This can be a significant deduction in year one.
Moving expenses. Generally not deductible for most taxpayers since the 2017 tax changes. Military members are the exception.
The move I recommend: Have a conversation with your CPA BEFORE you list your home. The timing of your sale (which tax year it closes in) can make a five-figure difference in your tax bill.
The next department over
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From the editor's desk
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