Before You Sell in Islip, Avoid These 5 Common Tax Errors

Selling your home in Islip can come with a financial windfall—but it also comes with potential tax implications. Whether you're downsizing, relocating, or cashing in on equity, it’s important to approach the sale with clarity to avoid any unexpected surprises. Here are 5 common tax-related mistakes sellers make—and how to avoid them:

1. Assuming the Entire Profit Is Tax-Free

Many homeowners believe all the profit from a home sale is automatically tax-free. In reality, the IRS allows for a capital gains exclusion of up to $250,000 for individuals and $500,000 for married couples, provided the home was your primary residence for at least two of the last five years. If you don’t meet the requirements, some of that profit could be taxable.

2. Failing to Keep Records of Home Improvements

Receipts, invoices, and documentation for capital improvements (like a new roof, kitchen remodel, or addition) are critical. These costs can be added to your home’s cost basis, potentially reducing your taxable gain. Without records, you could lose out on thousands in deductions.

3. Forgetting About State and Local Tax Rules

While federal rules often get the spotlight, New York State and Suffolk County may also have specific tax obligations when selling a home in Islip. From transfer taxes to local capital gains rules, sellers should stay informed—or risk underestimating their financial obligations.

4. Not Consulting a Tax Professional

Realtors can guide you through the sale—but they can’t provide legal or tax advice. If your sale involves a large gain, an investment property, or complex deductions, always consult a CPA or tax advisor. They’ll help you stay compliant and maximize your post-sale return.

5. Missing the Deadline to Report the Sale

Even if no taxes are owed, home sales must often be reported to the IRS on your tax return, especially if you receive a Form 1099-S. Failing to file the necessary forms or misreporting your gain could result in penalties or audits.

Selling your home in Islip can be a great financial decision—just don’t let tax mistakes ruin the win. For local guidance and expert support, contact Jeffrey Canas at Serhant South Shore. While we don't provide tax advice, we can connect you with trusted professionals and help make sure your transaction runs smoothly.