Are Realtor Fees Tax Deductible?

Finding legal deductions to claim when filing your taxes may seem difficult as you spend endless hours reviewing lengthy instructions. When it comes to selling real estate, keep these tips in mind for dealing with deductions. Knowing the rules for realtor fees or commissions can save you a bundle.

Deduct realtor fees and commissions from profits

The IRS allows you to deduct realtor fees and commissions from your profits. This deduction may mean a significant savings on a large sale. You may end up owing the IRS as much as 15 percent less or nothing at all.

Pay taxes on capital gains above your exemption amount

When selling a home, only profits over a taxpayer's exemption amount require tax payment. Your filing status determines the exemption depending on whether you are single or married. Find out what the limit is for the current tax year, and only pay tax if you exceed the exemption. If you do have profits above the exemption and you incurred realtor fees or commissions, make sure to deduct these from profits before calculating your tax. Use the worksheet in IRS Publication 523 to help you determine if there were any capital gains made on your sale.

By keeping these few tips in mind, when it comes time to filing your taxes, you can rest assured that you have the knowledge to take any deductions involving realtor fees or commissions and can use the legal profits for yourself instead of tax payments.