Do You Owe Taxes When You Sell Your Salt Lake County Home? What to Ask Your CPA

Do you owe tax when you sell a home in Salt Lake County? It depends. Tax applies to a gain, which is roughly what you sell for minus what the home cost you and what you put into it. Many homeowners who sell a primary residence owe little or nothing, because federal rules can let you exclude part of that gain when you meet ownership and use requirements. Others, such as people selling a rental, an inherited home or a house they owned for a short time, may owe more.

I am not a tax professional and this article is not tax advice. What I can do is show you the questions that change the answer, so you bring them to a CPA before you list rather than after you close.

Charisse Walker is a real estate agent with Chalker Properties Group in Salt Lake and Davis County, Utah, and a licensed mortgage lender. She works with sellers on their net proceeds every week, and tax is one of the line items that most often gets left out of the first estimate.

A few facts do most of the work. Gather them before you talk to anyone.

• What you paid. Your purchase price and the closing costs from when you bought.
• What you improved. A new roof, a finished basement or an addition can raise your cost basis. Routine repairs and paint generally do not.
• How long you lived there. The rules look at how long you owned and used the home as your main residence.
• How it was used. A home that was a rental for a stretch, or had an office or basement apartment, can be treated differently.
• How you came to own it. Inherited homes and homes received in a divorce follow their own rules.
• What you sell for. Your selling price, less the costs of selling.

A CPA turns those facts into an answer. Your job is to hand them clean numbers.

Start with the closing disclosure from your purchase. It shows your price and the costs paid at closing. Then gather receipts or invoices for major improvements, with dates. If you refinanced, keep that paperwork too, though refinancing is not the same as improving the home.

If you inherited the property, ask the estate's attorney or the executor for the value of the home on the date of death. That number often matters more than what the person originally paid. If you received the home in a divorce, ask for the final decree and any related paperwork.

Last, ask me or your agent for an estimated net sheet. It lists the likely sale price, commissions, title and escrow fees, payoffs and other costs. Your CPA can use it to estimate the gain.

• Assuming there is no tax. Many sellers are right, but some are surprised, especially after long ownership or a large gain.
• Counting every dollar spent as an improvement. Upkeep and improvements are different, and the paperwork has to support the claim.
• Ignoring timing. If you are close to a milestone, such as a full period of ownership, the date you close can matter.
• Waiting until tax season. By then the sale is done and the choices are gone.
• Leaving taxes out of the net. A number that looks great on the sign can look different after taxes and payoffs.

None of these are about being careless. They come from nobody asking early.

Here is a typical example, not a client story. A homeowner in Salt Lake County has lived in the same house for many years and plans to downsize. They expect a large check at closing and are already shopping for a smaller place.

Before listing, they sit down with a CPA. They bring their original closing paperwork and a folder of receipts for a new roof and a finished basement. The CPA confirms how the rules apply to them and what to expect. The homeowner learns what the likely tax picture is while there is still time to adjust the plan.

With that answer in hand, we set the list price and the timeline knowing what they can actually keep. It does not change the market. It changes how confident they are in the plan.

1. Start with a realistic sale price. Use recent comparable sales, not the highest number you have heard.
2. Subtract your mortgage payoff. Ask your lender for a payoff statement with a date, because interest keeps accruing.
3. Subtract the costs of selling. Commissions, title and escrow fees, prorated property taxes and any agreed repairs or credits.
4. Add back anything the buyer pays. For example, a prorated amount owed to you for taxes or utilities already paid.
5. Set aside an estimate for tax. Use the figure from your CPA, or leave a clearly marked placeholder until you have it.
6. Plan your next step. Whether that is a down payment on another home or a move into a rental, you now know the real number.

The mistake I see most often is stopping at step two. A seller subtracts the payoff and calls the rest profit. The remaining steps often account for a meaningful part of the money.

Your net sheet should be easy to read and easy to change. If a number moves, you should see exactly where. Ask for one before you decide on a list price, and again when you have an offer. The two numbers will not be the same, and that is normal.

Before you list, if any of these apply to you: you lived in the home for a short time, you rented part of it, you inherited it, you received it in a divorce, you claimed a home office, or you made major improvements over the years. Those are the situations where the answer is least obvious.

It also makes sense to call a CPA if you expect to be near a threshold where timing changes the result. A closing date a few weeks earlier or later can matter in some cases, and it is better to know before you pick a date.

You do not need a long meeting. Bring your purchase paperwork, your improvement receipts and a net sheet, and ask the CPA to tell you what to expect. If the answer is that there is likely nothing to pay, you have lost an hour. If the answer is different, you have gained time to plan.

Charisse Walker is a real estate agent with Chalker Properties Group in Salt Lake and Davis County, Utah, and a licensed mortgage lender. She is not a tax advisor, which is exactly why she asks sellers to involve one.

Is the money I receive at closing the same as my taxable gain?

No. Your cash at closing is what is left after payoffs and costs. Your gain is calculated from your price, your basis and the costs of selling.

Do I have to report the sale?

That is a question for your CPA. Reporting rules depend on your situation, and the closing company may send forms to the IRS.

Does moving to a smaller home change the tax?

Buying something cheaper does not by itself change whether the sale is taxed. Your CPA looks at the sale, not the next purchase.

What if I inherited the house?

The starting value is often different from what the original owner paid, so get the date-of-death value and talk to a CPA or estate attorney.

Should I talk to a CPA before I list?

Yes, if you have any doubt. It costs less to ask early than to be surprised later.

Charisse Walker is a real estate agent with Chalker Properties Group in Salt Lake and Davis County, Utah, and a licensed mortgage lender. She builds a net sheet with you before you list, so the tax conversation with your CPA starts from real numbers.

The selling your home page walks through the full process, and the home valuation page shows how pricing is set. For sellers moving to something smaller, the downsizing page covers that plan.

Thinking about selling in Salt Lake County? Contact Charisse for a net sheet you can take to your CPA. This article is general information and not legal or tax advice.