When I sell my house, will the title company issue 1099s regardless? Do they ignore the original purchase cost?

Thanks for explaining! So even though they report the full sale amount, I won't actually be taxed on that amount? I've definitely lived in my house for more than 2 years. Also, do I need to worry about keeping receipts for all the improvements I made over the years? Some of them were paid in cash and I'm not sure I kept great records.

You won't be taxed on the full sale amount - you'll only be taxed on your profit (the sale price minus your cost basis), and even then, the Section 121 exclusion will likely reduce or eliminate any tax liability based on your situation. Regarding improvements, ideally you should have documentation for all substantial improvements as these increase your cost basis and reduce your taxable gain. For the improvements you've already made, gather whatever documentation you can - receipts, canceled checks, credit card statements, contractor invoices, etc. Even if your records aren't perfect, try to reconstruct reasonable estimates with whatever supporting evidence you have.

How does it work with accessing older documents? My purchase paperwork is from 2015 and some of it is probably in storage. Do I need to scan everything in or can I just enter the numbers manually?

Seems suspicious that a website could understand complex real estate tax situations... Did it actually save you money compared to just using TurboTax or going to an accountant? I'm selling a house that's gone up like $200k in value but I've put at least $80k into renovations.

You can either scan documents or take pictures with your phone - the system can read most document types including settlement statements and receipts. For older documents that might be faded or difficult to read, their system still works surprisingly well. If some documents are missing, you can enter information manually. I definitely saved money compared to my accountant who wanted to charge me $850 for handling the house sale portion of my taxes. It was also much faster than manually entering everything into TurboTax, which doesn't give you much guidance on home improvement expenses. In your case with $80k in renovations, having those properly documented and calculated would make a huge difference in your tax liability.

Wait, this actually works? How is that even possible when the IRS phone lines are impossible to get through? I've been trying to clarify some questions about my home sale for weeks and keep getting disconnected.

Sounds too good to be true. I've literally spent HOURS on hold with the IRS and never got through. How could some service magically get you to an agent? I bet they're just connecting you to some fake "tax experts" who aren't actually from the IRS.

Yes, it actually works! It uses some kind of technology that navigates the IRS phone system and holds your place in line. When they're about to connect to an agent, you get a call back. I was skeptical too but the person I spoke with was definitely an IRS employee - they verified my information and answered questions about IRS procedures only an actual agent would know. The service just gets you past the hold time and connection issues. Once you're connected, you're talking directly to the real IRS, not some third-party "experts." I confirmed this because the agent referenced specific information from my previous tax filings when answering my questions.

I'm in Illinois - does anyone know if they do withholding here too? My closing is scheduled for about 6 weeks from now, so I want to make sure I understand everything before then. Should I be talking to my real estate agent about this or the title company directly?

Illinois doesn't have automatic withholding for residents selling property within the state. If you're an Illinois resident selling Illinois property, you shouldn't face withholding at closing. I'd recommend talking to both your real estate agent and the title company to confirm. Your agent should have experience with local closing procedures, but the title company is ultimately responsible for handling the financial and legal aspects of the transaction, including any tax reporting requirements.

What's the difference between "improvements" and "repairs"? I replaced my roof last year for $15k, is that an improvement or a repair?

A roof replacement is generally considered a capital improvement, not a repair, so you should be able to add that $15k to your basis! The IRS distinguishes improvements as things that add value to your home, extend its useful life, or adapt it to new uses. A full roof replacement definitely extends the useful life of your home. Repairs, on the other hand, are things that keep your property in good working condition but don't add significant value - like fixing a few broken shingles or patching a small leak. Since you replaced the entire roof, that's definitely an improvement that increases your cost basis and reduces your taxable gain when you sell.

This is really helpful advice! I'm new to all of this and didn't realize that closing costs from when I bought could be added to my basis. I'm going to start gathering all my paperwork now like you suggested. Quick question - do things like home inspection fees and appraisal costs from my original purchase count as closing costs that can be added to basis? I think I paid around $800 for those but want to make sure before I include them in my calculations.

Yes, home inspection fees and appraisal costs from your original purchase typically can be added to your basis! These are considered part of your closing costs since they were necessary expenses to complete the purchase of your home. The $800 you paid should help reduce your taxable gain when you sell. Other purchase-related costs you might want to look for include loan origination fees, points paid to get your mortgage, title search fees, and any attorney fees. Even smaller items like notary fees and document preparation costs can add up. Since you're being proactive about gathering everything now, you'll be in great shape come tax time!

This is exactly the kind of clear explanation I needed! So just to make sure I understand correctly - even though the 1099-S might show something like $475k, I would only potentially owe taxes on the amount above my $325k basis (purchase + improvements), and then I can exclude up to $250k of that gain anyway since it's my primary residence? That would mean I might not owe anything at all, which is a huge relief! I was really worried I'd get hit with a massive tax bill just because the 1099-S shows the full sale amount. Thanks for breaking this down so clearly.

Exactly right, Henrietta! You've got it figured out perfectly. The 1099-S is just a reporting form - it doesn't determine your tax liability. Your actual taxable gain would be the sale price minus your adjusted basis ($325k in your example), and then the Section 121 exclusion can shelter up to $250k of that gain since you've lived there as your primary residence for over 2 years. In your scenario, if you sell for $475k with a $325k basis, your gain would be $150k, which is completely covered by the $250k exclusion. Zero tax owed! The key is having good documentation of your purchase price and improvements. Keep those receipts and records organized - you'll need them when you file your return to properly calculate everything, even if you don't end up owing any tax.

This is really helpful additional information! I hadn't thought about the timing requirements but you're right - I bought in early 2018 and will be selling in a few months, so I should be well over the 2-year requirement. I'm single so the $250k exclusion applies to me. Your point about still needing to report the sale even if I don't owe tax is crucial - I would have probably just ignored the 1099-S if my gain was under the exclusion amount. Good to know the IRS will be expecting to see it on my return regardless. I'll make sure to properly document everything on Schedule D and Form 8949 when I file. Thanks for the heads up about the reporting requirement!

This is such valuable advice about capital improvements vs. maintenance! I'm actually in a similar situation and was wondering about some of the work I've done. I replaced all the flooring throughout my house with hardwood - that would definitely count as a capital improvement, right? Also, what about adding a deck or patio? I put in a composite deck last summer for about $8k and wasn't sure if that adds to my basis or not. It sounds like since it adds value to the home, it should qualify. Thanks for the tip about checking past tax returns for energy credits too - I did replace my HVAC system a few years ago and might have claimed something for that.

Yes, replacing all your flooring with hardwood absolutely counts as a capital improvement! That's exactly the kind of upgrade that adds value and should be included in your basis calculation. Same with your composite deck - adding a deck is definitely a capital improvement since it's a new addition that increases your home's value and usable space. That $8k should definitely be added to your cost basis. For your HVAC replacement, that's also a capital improvement, and you're smart to check your old tax returns. You might have claimed energy efficiency credits when you installed it, but you can still add the full cost to your basis regardless of any credits you received. The key is documentation - try to gather receipts, contracts, or any paperwork you have for these projects. Even if your records aren't perfect, bank statements or credit card statements showing payments to contractors or home improvement stores can help support your basis adjustments. With flooring replacement, a deck addition, and HVAC replacement, you're probably looking at substantial additions to your cost basis that will really help reduce any taxable gain when you sell.

This is such an important point about selling expenses that I hadn't fully considered! I'm actually the original poster (Ryan Kim) and this whole thread has been incredibly helpful. Between the purchase price ($285k), improvements ($40k), and now knowing I can deduct selling expenses like realtor commissions, it sounds like I'm in really good shape tax-wise. If I sell for around $475k and have $28k in selling expenses, my net proceeds would be $447k. Subtract my $325k basis (purchase + improvements) and I'm looking at about $122k in gain - well under the $250k exclusion. It's amazing how much less stressful this feels now that I understand the process better. Thanks to everyone who contributed to this discussion - you've saved me from a lot of worry and probably from hiring an expensive accountant just to tell me I don't owe any tax on the sale!

This is excellent advice about organizing documentation ahead of time! As someone who's new to this whole process, I really appreciate the specific checklist you provided. I'm definitely going to create that folder and start gathering everything now rather than scrambling later. One quick question - you mentioned permits for major work. I had a contractor do my kitchen renovation and I'm pretty sure they pulled permits, but I'm not sure I have copies. Should I contact the city/county to get copies of those permits, or is that not really necessary if I have the contractor invoices and receipts? I want to make sure I'm being thorough but also don't want to overcomplicate things if the permits aren't crucial for tax purposes. Thanks again for all the helpful guidance in this thread - it's been a real education!

Great question about permits! While having permit copies can be helpful documentation, they're not absolutely essential for tax purposes if you have solid contractor invoices and receipts. The permits mainly serve as additional proof that the work was actually done and was substantial enough to require city approval, which supports the "capital improvement" classification. That said, if it's easy to get copies from your city/county, it might be worth doing since permit records often include details about the scope and cost of work that can be useful if the IRS ever has questions. Many municipalities have online permit databases where you can search by address and print copies yourself. But don't stress if you can't easily get them - your contractor invoices showing the work performed and amounts paid are the primary documentation you need. The permits would just be icing on the cake. Focus your energy on gathering the receipts and invoices first, then worry about permits if you have extra time and they're easily accessible.