Tax Benefits Of Homeownership
Deducting mortgage interest
One of the biggest incentives to owning a home is that the interest you pay on your mortgage is tax-deductible, up to a limit of $1 million. This deduction, like most other tax breaks for homeowners, applies to any kind of home. That includes a second home, as long as you spend a certain amount of time there: either 14 days each year, or 10% as much time as it's rented.
In addition, you can deduct the interest on up to $100,000 of other debt that uses your home as security such as a home equity loan. However, the amount you can deduct may be limited if the money you borrow raises your debt above the home's actual market value. This can sometimes happen when a lender extends you a loan based on more than the value of the house.
You can also deduct any amount you pay for points to reduce the interest rate of your mortgage or other loan linked to your home. In most cases, the points on a mortgage to buy or build your principal home can be deducted fully in the first year. However, if you refinance, take a home equity loan, or a loan secured by a second home, the points must be deducted over the life of the new loan. The exception is if you use part of a refinanced mortgage to improve your house; that portion of the points can be deducted in the same year.
Tax-free profits
Another major advantage of homeownership is that, in most cases, you don't have to pay taxes on any profit you make when you sell your home. The law allows you to exclude from taxes up to $250,000 in profit from the sale of your principal home -- $500,000 for a couple who file jointly. This exclusion also covers the sale of a parcel of land adjacent to your house, unless it's used for business.
There are some stipulations, however. The home must be your principal residence, and you (and your spouse, where applicable) must have lived there for at least two of the previous five years. You can only claim the exemption once every two years. If you don't meet those requirements, you may still claim a partial exemption if the sale was due to a change in your place of employment, necessary for health reasons, or due to other unforeseen circumstances.
Don't forget property taxes
You can claim property taxes you pay as an income tax deduction. This applies to both your principal home and any others you may own. Any money held in escrow to pay future taxes, however, is not deductible.
Write off your moving costs
The government allows you to write off many of your moving costs when you buy a new home if it's at least 50 miles closer to your job than your old home. To qualify, you must continue to work full-time in the general area of your job for 39 weeks during the following year. If you're self-employed and work in your home, any move of 50 miles or more will make your moving expenses deductible. However, you must also work full-time near the new location for 78 weeks during the next 24 months.
Of course, because tax rules vary based on income and other factors, be sure to consult an accountant or financial advisor about your particular situation.
About the Author
HomeLoanCenter.com provides expert mortgage advice and helpful tools, to help you whether you�re buying a new home, refinancing your current loan, or simply want more information.
Source: Free Blog ArticlesI'm happy to share this information. First time home buyer planning guide.
Gene Mock ~ Making It Easy!
If you are looking for homes for sale in Aiken,
Equestrian, Golf & Gated Communities with houses and building lots for sale, Condos & Townhouses, Patio Homes, Commercial Properties, Development Land, Horse Property, Historic & Luxury Estates, Downtown Cottages, Polo properties....all this and more are for sale in Aiken County, South Carolina.
Have you heard about Woodside Plantation and The Reserve at Woodside? A popular gated community in Aiken. No matter what your dream...homes, condos, town homes, cottages, horse farms, golf property, lots, land, investments.....you can find it right here in Aiken, South Carolina. Start searching for your next
Search the entire Aiken MLS right here! Find your Aiken realty today.
Gene Mock, Realtor. Gene is a proud member of The National Association of Realtors, South Carolina Association of Realtors, and Aiken Board of Realtors.
Gene Mock ~ Making It Easy!
Comments