So you’ve finally sold your home. Congratulations! Although the heating 2019 market may have helped a little. In any case, you’ve just made arguably the largest financial decision you will ever make in your life. Whether it’s moving to a new home, offloading an additional property, or celebrating a successful flip, the dwelling is well on its way to being in the hands of a new owner. As you begin to review and pay the bills associated with the sale of the home, and with tax season right around the corner, you wonder, “Can I expense the costs associated with the sale of my home?”
Can I Expense the Costs?
The laws that dictate what can and cannot be expensed in the sale of your property vary by your jurisdiction (local, state, or national authorities). However, in most cases in the Toronto Real Estate market, if the sale is not considered to be taxable, then costs associated with selling the property can be expensed. Traditionally, a sale is tax-exempt (and therefore sale costs are not eligible to be expensed) when the sale is your principle residence (i.e. your primary home). However, new regulations and tax laws have recently changed what sales are considered taxable. Its best to check with your local Legal Advisor and/or Certified Tax Professional to determine if the profit from the sale will be considered taxable income.
What does “Expense” Mean?
When a cost is expensed, it is applied against the gain in order to create the net gain (a taxable entity).
As a reminder, the general formula is:
Cost of Acquisition + Cost of Improvements = Adjusted Cost Base
Sell Price – Adjusted Cost Base = Gain (pre-tax)
Gain – Expenses = Net Taxable Gain.
The costs you can incur when selling your home vary depending on your contract with your REALTOR®, the cooperating brokerage, and other factors. Some examples may include:
- Commission/Brokerage Fee
- Home Inspection
- Environmental Reports
- Photography, Virtual Tours, or Videography
- Digital and Print Advertising
- Home Staging Costs
- Legal Fees + Applicable Disbursements
- Taxes Payable (in some cases)
One of the advantages of working with Catalyst, along with integrated Real Estate Services, is that we tend to absorb many of the costs associated with selling a home. For a free consultation with a Lawyer, be sure to contact us.