As Arizona’s real estate market continues to soar, more homeowners are facing capital gains taxes as their home values surpass IRS exemption limits. Currently, homeowners can exclude up to $250,000 in profit from the sale of a primary residence as single filers, or $500,000 for married couples filing jointly, provided they meet eligibility requirements like having lived in the home for at least two of the last five years. With rising property values, especially in cities like Phoenix and Scottsdale, some sellers are now finding that their gains exceed these thresholds, making them liable for taxes on the excess profits.
Real estate professionals recommend that homeowners considering a sale calculate their potential capital gains before listing their property and consult a tax advisor to understand their liabilities or any steps they can take to reduce their tax bill. Strategies may include documenting major improvements to increase the cost basis, thus reducing the taxable gain, or timing the sale to maximize eligible exemptions. Understanding these tax implications is increasingly important as Arizona’s housing market remains strong and property values continue to climb.
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