Month: August 2025

There are plenty of things to think about when selling your home, from where you will go in the future to coordinate the moving of your items and actual closing of the sale. One thing that you may not immediately think about is how selling a home can affect your taxes. Depending on appreciation of your home, you may be required to pay capital gains taxes. The good news is that homeowners are exempt from this tax if the capital gains amount is under $250,000 for single filers and $500,000 for married couples filing jointly. This exemption only applies to homes that are your primary residence and can only be used once every two years.

A homeowner in Hudson had lived in his current residence for many decades. Finally ready to move on, he was concerned about how the increased value of his home would impact his taxes. He contacted the team at Merrimack Tax Associates with this question.

Calculating Capital Gains Tax on the Sale of a Home

Beyond the threshold of $250,000 or $500,000 exemption for joint filers, the increase in the house sale vs. the price it was bought at is taxed as capital gains. In most cases, a home sale is considered long-term capital gains. Depending on your tax rate this can range anywhere from 15% to 28%.

Home Improvement Deductions Can Reduce the Capital Gains Tax on a Home Sale

One useful way to offset some of the capital gains, reducing your tax bill, is by deducting home improvement projects that have been done to the home during your ownership. To qualify for this deduction, this must be home improvement projects as opposed to home repairs. Items that would qualify to reduce the capital gains tax include additions, interior remodeling projects, installing new plumbing or electrical system and many others. In general, when these improvements are lasting more than a year and are not simply repairs, they qualify for this deduction. Keeping track of these home improvements over the duration of your time in the home can significantly decrease, or even eliminate, any necessary capital gains taxes.

The Hudson homeowner was pleased to hear that he had options to reduce his tax bill when selling the home. He has already begun the task of gathering his records of home improvement projects over the years in preparation for selling his home.

The One Big Beautiful Bill Act was just passed in 2025. This has some important tax changes that will affect most people in some way. The standard deduction saw an increase in the bill to $15,750 for single filers and $31,500 for married couples filing jointly. The Child Tax Credit also increased, moving to $2,200. The 2017 Tax Cuts and Jobs Act, which was set to expire this year, was made permanent. There were also a number of temporary deductions included in the One Big Beautiful Bill Act. These include a deduction of up to $25,000 on tip income, no tax on overtime capped at $12,500, and an additional senior deduction of $6,000.

A Nashua resident has been hearing a lot about the recently passed One Big Beautiful Bill Act and how it would affect taxes. However, she was unsure about how this would impact her directly. She reached out to the Merrimack Tax Associates team for advice and a better understanding of how she would be affected.

Other Changes to Tax Benefits Under the One Big Beautiful Bill Act

New car buyers that are taking out a loan can deduct up to $10,000 of qualified interest on the loan. This only applies if the vehicle is a final assembly in the United States and phases out for higher income earners. Clean vehicle credits will be eliminated for any vehicle that is purchased after September 30, 2025. The tax credits for energy efficient home improvements will also be eliminated after 2025 under the One Big Beautiful Bill Act.

Effective in 2026, how you claim charitable contributions on your taxes will be changed also. For those filers taxing the standard deduction, charitable deduction will be capped at $1,000 for single filers and $2,000 for married couples filing jointly. When itemizing your deductions for charitable contributions, you will be required to reduce your deduction by 0.5% of your contribution base, which is generally your adjusted gross income.

After speaking with Merrimack Tax Associates, the Nashua resident now has a better understanding of how the One Big Beautiful Bill Act will affect her personally.