Tax prep documents for 2023 buyers and sellers

Key Insights

• Homebuyers and sellers need to fill out specific forms for their taxes.
• When in doubt, don’t throw it out! Keep a file of receipts from your home transaction.
• Your REALTOR® can help guide you in the right direction regarding tax documents.

Buying or selling a home is likely one of the largest financial transactions you’ll make in your lifetime. While it’s easy to get swept up in the emotions and excitement of a move, you’ll also want to consider the logistical components of your move. The paperwork you sign will become especially important around tax time.

If you bought or sold a home last year, you’ll need specific documents for tax preparation. Here, we’ll dive into the details of each of these home-related tax documents:

• Form 1098
• Form 1040
• Form 1099-S
• Closing Disclosure

Keep in mind that this is general advice and you should work with a tax or accounting expert to ensure you accurately fill out any tax forms and otherwise prepare your taxes.

What tax documents do homebuyers need?

If you’re a new homebuyer, look out for Form 1098. This document, also called the Mortgage Interest Statement, will be sent to you if you’ve paid mortgage interest totaling $600 or more in the last tax year.

This form helps new homeowners identify the total amount of interest they’ve paid over the course of the year, which can then be used to calculate potential mortgage interest deductions. Keep in mind that there are requirements to qualify for mortgage interest deductions on your annual tax return. If the following applies to you, you may be eligible for the deduction and we encourage you to speak with a tax professional to determine whether you qualify:

• You’ve paid mortgage interest totaling $600 or more in the last year.
• You are actively contributing payments to the loan.

If, however, you’ve contributed less than $600 to home mortgage interest, you will not get Form 1098 in the mail from your lender. Either way, you’ll need to fill out the optional Schedule A attachment accompanying Form 1040 to claim any itemized deductions, including a mortgage interest deduction.

What tax documents do home sellers need?

If you’ve sold a piece of real estate for a sale price of at least $250,000, you should receive and report Form 1099-S, also known as the Proceeds from Real Estate Transactions form. This document indicates that you’ve sold a home and is used to calculate whether you need to pay capital gains tax.

The 1099-S document will be provided to you at the time you sign your documents if you’re required to report your sale. The 1099-S is used to report the gross proceeds from the sale of real estate. It is generally required for an individual home seller whose home sale price exceeds $250,000 or $500,000 for a married couple.

If I sell my house, do I pay capital gains tax?

Everyone should save these papers for taxes

At the time of closing, buyers and sellers will each receive a Closing Disclosure form or an ALTA Settlement Statement, which documents the closing costs associated with the home transaction. It’s important to keep track of this form in the event that you can deduct itemized closing costs from your taxes. Here is an example of what the form will look like and include.

In general, whether you’re buying or selling a home, it’s best to save all documents related to your homeownership. These will come in handy should you need them for tax purposes, or if you ever happen to be audited.

Here are some papers you’ll want to keep track of:

• Records from your home sale
• Any mortgage or insurance documents
• Documents proving your home is your primary residence (voter registration, tax returns, bank statements, utility bills, etc.)
• Receipts from home improvement projects

Moving forward with your taxes

Taxes can feel daunting, especially the year after you’ve bought or sold a home. While you may want to hire someone to prep your taxes this year, you can also reach out to your agent for assistance obtaining some of the above documents.

And for more information on tax documents, or to download these forms, check out the Internal Revenue Service (IRS) website and the Consumer Financial Protection Bureau (CFPB) webpage.