Boston Condos for Sale and Apartments for Rent

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Did you sell your Boston condo in 2021 ? Here’s how you can save money on your tax bill

  • Boston condo sale profits may be subject to capital gains, taxed at 0%, 15% or 20% in 2021, depending on income.
  • You may exclude earnings up to $250,000 if you’re single, while married homeowners may subtract up to $500,000.
  • However, with soaring Boston condo values, almost all downtown Boston condo sellers will be over those thresholds.

If you recently made a profit selling your Boston Back Bay or Beacon Hill condo, it may come with a costly surprise this filing season: capital gains taxes on your windfall.

In 2021, the average U.S. home seller scored a profit of $94,092, up 71% from $55,000 two years ago, according to ATTOM, a nationwide property database.

Boston condo profits and capital gains

Boston Fenway condo or Boston Seaport condo sales profits are considered capital gains, levied at federal rates of 0%, 15% or 20% in 2021, depending on taxable income.

The IRS offers a write-off for homeowners, allowing single filers to exclude up to $250,000 of profits and married couples filing together can subtract up to $500,000.

But these thresholds haven’t changed since 1997, and median Boston condo sales prices have more than doubled over the past two decades, affecting many long-term homeowners. 

Boston Condo Exemptions

While the exemption may be significant for some homeowners, there are strict guidelines to qualify. Boston condo sellers must own and use the home as their primary residence for two of the five years preceding the sale.

Someone owning two Boston condos may split time between the properties, and if their cumulative time living at one place equals at least two years, they may qualify.

Moreover, someone may convert a Boston rental property to a primary residence for two years for a partial exclusion. In that case, the write-off is based on the percentage of their time spent living there, she explained.

For example, if a single filer owns a rental property for 10 years and lives there for two, they may be eligible for 20% of the $250,000 exclusion or $50,000.

Increasing basis

If homeowners exceed the exemptions and owe taxes, they may reduce profits by adding certain home improvements to the original purchase price, known as basis, Schultz explained.

For example, home additions, patios, landscaping, swimming pools, new systems and more may qualify as improvements, according to the IRS

Of course, homeowners need to show proof of improvements, which can be difficult after many years. However, if someone lost receipts, there may be other methods.

Homeowners may also increase basis by adding certain closing costs, such as title, legal or surveying fees, along with title insurance.

Sneaky tax consequences

There’s also the possibility of other tax consequences when selling a home with a large profit.

For example, boosting adjusted gross income can affect eligibility for health insurance subsidies, and may require someone to pay back premium credits at tax time.