Tax Strategies for Homeowners

And if you made any energy-efficient improvements in 2006 to get your home ready for its big sale, make sure you get credit for those upgrades on your tax return, says Bob Scharin, editor of Warren, Gorham & Lamont/RIA's Practical Tax Strategies, a monthly journal for tax professionals. Check out this previous story for more about which energy-efficient upgrades qualify.

It Was a Buyer's Market

It was the year of the buyer last year. Sellers were practically giving away their firstborn kids just to get the deal done. Fortunately, you don't have too much to worry about on your 2006 tax return if you bought your dream house (furnishing it is taxing enough!).

But what do you need to do is start keeping track of your basis in that new house. Remember, when you decide to sell (I know, the boxes aren't even unpacked), your gain is the difference between the selling price and the basis. So the higher your basis, the smaller your gain. And you need to keep that gain within the exclusion limits of $250,000 for singles and $500,000 for married couples to avoid a tax hit.

So tally your basis. Start with your purchase price and add your closing costs, including legal fees and costs for surveys and titles.

And don't forget about the mansion tax that some states impose. For instance, in New York, if the purchase price of the home is $1 million or more, the buyer must pay a "mansion tax" equal to 1% of the total price. Be sure to add that to your basis as well.