| Homeowners
enjoy a number of tax breaks that can have a major impact on
affordability. |
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Consulting
a Tax Pro
As with all tax matters, the laws covering deductions
and exemptions for home- ownership can be complex. A number
of conditions and exceptions apply, so if you are uncertain
about your exact status, it is well worth consulting your
accountant or tax professional. |
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Homeowner
Tax Breaks
Favorable
tax treatment is a major benefit of homeownership. The tax breaks
offered to homeowners can substantially increase affordability and
investment returns.
Mortgage Interest Is Deductible
Interest from a home mortgage is fully deductible from income taxes.
Since mortgage payments in the early years of a loan consist primarily
of interest, this tax break has long helped buyers afford new homes.
The deduction applies to interest on up to $1,000,000 in loan proceeds
used to purchase or build a primary and/or secondary home.
Home Equity Interest Is Deductible
Interest on a home equity loan of up to $100,000 is deductible,
regardless of the use of the proceeds.
Property Taxes Are Deductible
Property taxes paid to local or state authorities are deductible
from federal income tax returns.
Capital Gains Are Tax-Exempt
Capital gains - the profit made when an appreciated home is sold
- are completely exempt from taxation, subject to certain limits
and conditions. Single filers may exempt total gains of $250,000
and married couples, $500,000. This exemption is subject to a number
of qualifications, but usually applies to any property the taxpayer
has lived in for two of the previous five years.
Increased Basis for Improvements
Money spent on certain home improvements adds to your cost basis
for the house, reducing the amount of any capital gain upon sale.
Be sure to keep all receipts and records from home improvement projects.
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