Selling Your Home? Here’s What You Need to Consider

If you’ve owned your home for years, you’ve likely built up a significant amount of equity—especially with how real estate values have risen in recent years. Whether you're downsizing, relocating, or simply taking advantage of market conditions, selling your home is a major financial decision.

But what happens to that equity once you sell? How does it impact your tax situation, your retirement, and your long-term financial security?

Before making any big decisions, here are some key financial considerations to keep in mind:

1. Tax Benefits & Potential Liabilities on Your Home Sale

One of the biggest financial advantages of selling a primary residence is the ability to exclude a portion of the capital gains from taxation.

• If you have lived in your home for at least two of the last five years, you may qualify for the capital gains exclusion—up to $250,000 in tax-free profit for single filers and $500,000 for married couples.
• However, if your home has appreciated significantly beyond these thresholds, any additional gain may be subject to capital gains tax, which could be as high as?20% at the federal level (plus potential state taxes).
• If you’ve made major home improvements over the years, those costs can be added to your home’s cost basis, helping reduce your taxable gain.

What to do: Before selling, review your home’s cost basis, estimate your potential gains, and explore tax strategies to minimize your liability. A well-timed sale and tax-efficient planning can help you keep more of your equity.

2. Where Does Your Home Equity Fit in Your Financial Plan?

Many homeowners have a large portion of their net worth tied up in their homes. When you sell, it’s important to think about where that wealth fits into your broader financial picture.

• Are you using the proceeds for another home purchase, or will you free up cash for other goals?
• How does this sale affect your retirement income strategy? If you are entering retirement, having more liquidity could help cover expenses, delay Social Security, or reduce portfolio withdrawals.
• Are there estate planning considerations? If you plan to pass wealth to heirs, the timing and structure of your real estate sales could impact your estate strategy.

What to do: Work with a financial planner to determine how the equity from your home sale fits into your overall financial plan. A well-structured approach can help balance your cash flow, investments, and long-term security.

3. Buying Your Next Home: Cash vs. Mortgage Considerations

If you’re planning to buy another home after selling, you’ll need to decide how to fund your purchase:

• Paying in cash can eliminate mortgage payments and provide peace of mind, but it may tie up too much of your wealth in a non-liquid asset.
• Taking out a mortgage (even a small one) can help preserve liquidity, allowing you to invest or keep funds accessible for emergencies or other opportunities.

A key consideration is interest rates—if mortgage rates are high, using cash may be a better move. But if rates are lower than the expected return on investments, financing may provide greater flexibility.

What to do: Assess the pros and cons of paying cash vs. financing based on your income needs, investment strategy, and tax situation.

4. Boosting Retirement Savings & Financial Security

For many homeowners, selling a house provides a chance to strengthen long-term financial security. Here’s how you can put your proceeds to work:

• Invest for Growth – If you won’t need all of your home sale proceeds for another home, you can allocate some toward your retirement accounts, brokerage investments, or other growth-focused opportunities.
• Increase Liquidity – Having cash reserves (outside of home equity) gives you flexibility in retirement, reducing the need to withdraw from investment accounts in a down market.
• Pay Off Debt – Depending on your financial situation, using proceeds to eliminate high-interest debt or even a portion of your next mortgage could improve cash flow.

What to do: Evaluate how much of your proceeds should go toward investments, savings, or debt reduction to create the strongest financial foundation for the future.

Is Selling Your Home the Right Move? Let’s Talk About Your Strategy.

Every homeowner’s situation is unique, and the financial implications of selling your home go beyond just getting the highest price. Having a strategy for how to manage the equity, minimize taxes, and align it with your retirement plan is key to maximizing your wealth.

If you’re considering selling, let’s discuss how to best use the proceeds to fit your long-term financial goals.

Schedule a time to talk here Let's Talk! —I’d love to help you make the best financial decision for your future.

Securities offered through Van Clemens & Co., member FINRA and SIPC. Advisory services offered through Van Clemens Wealth Management, a Registered Investment Adviser.?inFORM Financial Planning and Van Clemens Wealth Management are separate entities. All views, expressions, and opinions included in this communication are subject to change. This communication is not intended as an offer or solicitation to buy, hold or sell any financial instrument or investment advisory services. Any information provided has been obtained from sources considered reliable, but we do not guarantee the accuracy, or the completeness of any description of securities, markets or developments mentioned.