What to Know About Home Sales and Taxes in Arizona

real estate agent's office, home sales and taxes concept.

A tax attorney can help you understand the potential tax implications.

There is a lot to consider when buying or selling a home. What is your price range? Are there problems with the home that need to be addressed? How will I handle the logistics of moving? It can all get pretty confusing.

Another thing to consider is taxes – whether you are buying or selling. Knowing what to expect can help you plan for the future and make the process less stressful. An experienced Arizona tax attorney can help.

If you are selling a home

First, the good news. There is no real estate transfer tax in Arizona. That’s thanks to Proposition 100, which was signed into law in 2009.

That doesn’t mean you won’t owe any taxes if you sell your home. There are federal taxes that apply to capital gains. Any profit you make from selling real estate is subject to these taxes. However, you may be eligible for an exemption of up to $250,000 or $500,000 for a married couple filing jointly.

To qualify for these exemptions, you must meet the ownership and use tests. Essentially, during a five-year period that ends on the date of the sale, you must have owned the home for at least two years and lived in the home for at least two years. In addition, you must not have excluded the gain from the sale of another home.

If you are buying a home

Because there is no real estate transfer tax, home buyers don’t need to pay sales tax. But they will be subject to state and local property taxes. However, you may be able to deduct up to $10,000 of these taxes on your federal return as a married couple filing jointly or $5,000 for single people or married filing separately.

As a homeowner, you may also be able to claim other deductions as they apply to your situation. Examples include:

Mortgage interest – This applies to the first $750,000 of indebtedness, $375,000 if married, filing separately
Home equity loan interest – This is deductible if the funds are being used for home improvements.
The cost of discount points – Points you bought up front to lower your interest rate may be deductible.
Necessary home improvements – These improvements must be deemed necessary, such as to increase accessibility.
Home office expenses – The amount of your deduction is tied to the percentage of your home dedicated to a business.

An experienced tax attorney can help.

The last thing you want when buying or selling a home is an unexpected expense. That’s why it’s important to discuss your situation with an experienced Arizona tax attorney. A lawyer can help you prepare for the transaction and give you the information you need to help avoid any financial complications.

Founded in 2014, The Law Firm of Brown & Jensen is a full-service firm ready to help you find solutions to any potential tax issues you’re facing when buying or selling a home. Contact us to schedule a consultation today. Serving clients in Mesa, Tucson, Scottsdale, Chandler, Peoria, Goodyear, Payson, and Show Low.