Make the Most of Home Ownership Tax Breaks

Tax Pic

The simplest financial reason to buy a home is that it is a better investment, in the long run, than renting. You have to live somewhere, so why not pay your own mortgage and not your landlord’s? But don’t forget to reap the not insignificant financial benefits of home ownership along the way.

The tax benefits listed below apply to multiple types of residences, including town houses, single family homes, mobile homes, condominiums, and co-ops.

Mortgage deduction

This is the biggest cost saver. Homeowners are able to deduct their mortgage from their taxes. For many people this is a substantial deduction, since interest payments can be the largest component of your mortgage payment in the early years of owning a home.

Closing cost deductions

Regardless of whether closing costs were paid for by you or the seller, you are able to claim the points, or origination fees, on your loan.

Property tax is deductible

Real estate property taxes paid on your primary residence home are fully tax deductible. This also includes one vacation home.

Tax deductions on home equity lines

If you have taken out a home equity loan, the interest is tax deductible. This is also an opportunity to move high interest credit card debts to home equity loans, allowing for additional savings.  

Capital gains exclusions

If you have lived in your home for more than two years and decide to sell, up to $250,000 of the profits are excluded from capital gains taxes. This goes to up to $500,000 if you are married. Even if you need to move in three years, while you may not have much (if any equity) and you’re able to sell for what you paid for it, essentially break even, it’s like you rented from yourself!

Always be sure to consult with a tax professional.

Feel free to add your home-ownership financial tips!

 

 

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