We SOLD a house for the first time, and I learned a lot...
/#1 Real estate commissions are negotiable.
As the seller, you negotiate the commission upfront with your realtor. The buyer does the same and lists the commission their agent will receive in the offer letter.
We negotiated the buyer's agent commission to match our agent's commission of 2% (a family/friends discount), resulting in a 4% overall commission. 6% (3% split between the realtors) was the standard before the class action lawsuit against the National Association of Realtors (NAR) that settled in 2024. That 2% reduction saved us $24,000.
#2 For the 2 of 5 years capital gains exception - there is a generous extension for active-duty military required to move due to orders.
The basic rule is that if you owned and used the home as your residence for at least 24 months of the last 5 years, you qualify for a capital gains exclusion (up to 250K single / 500K MFJ).
If you qualify, you can receive a 10-year extension (24 months of the last 15 years). Check out IRS publication 523 for the details and talk to your tax person if you think this could apply to you.
#3 Depreciation reduces your cost basis.
All the years we rented our house out, we got the benefit of taking depreciation to reduce our taxable rental income. Now that we have sold, that depreciation will reduce our cost basis on the home (increasing the gain).
#4 Our system for tracking capital improvements over the years was pretty organized, but I would make one change.
Capital improvements (ex., kitchen remodel, new roof, new HVAC) increase the home's cost basis and reduce your tax bill.
I have a Box folder for every property we own. Anytime we do a capital improvement, I save the receipt in the appropriate folder. In the future, for Home Depot receipts, I will write directly on the receipt what the purchases were for (ex., bathroom remodel) before scanning them into Box. I had a lot of loose receipts in folders or envelopes, and that ended up being a messier process than I would like.
What else am I missing?
Linda Rogers, CFP®, EA, MSBA is the owner and founder of Planning Within Reach, LLC (PWR). Originally from New Jersey, Linda services clients throughout San Diego county and nationwide. She leads the design of PWR's investment portfolios which utilize broad, low-cost investments that integrate environmentally, socially, and governance (ESG) factors.
Planning Within Reach, LLC (PWR) is a fee-only and fiduciary wealth management firm offering one-time comprehensive financial planning, ongoing impact-focused investment management and tax preparation services in San Diego and nationwide. PWR is a woman-owned firm that specializes in busy professionals and impact investors. Planning Within Reach, LLC and their advisors do not receive commissions and do not hold any insurance licenses or brokerage relationships.