Home Ownership Tax Benefits
The federal government wants you to be a homeowner. This is demonstrated in several ways. First, the government encourages homeownership by insuring mortgages against default. Secondly, a variety of tax deductions are available for homeowners. Even in a depreciating real estate market, the tax benefits of owning a home can be compelling reasons to buy instead of rent. However, there is much confusion about what can and cannot be deducted regarding home ownership. Every situation is a little different, and seeking professional tax advice prior to using these suggested home ownership tax benefits is advised. (For more on taxes and homeownership, read A Tax Primer For Homeowners)
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Some of the best perks of owning a home are the tax breaks. Know what expenses
you can deduct, and understand how new laws affect you. If you're currently
renting, consider the tax advantages of homeownership. This may be the time to
buy a home. Remember to consult your tax advisor.
Read more: http://www.investopedia.com/financial-edge/1011/3-tax-benefits-for-homeowners.aspx#ixzz2NM5JoJdK
Some of the best perks of owning a home are the tax breaks. Know what expenses
you can deduct, and understand how new laws affect you. If you're currently
renting, consider the tax advantages of homeownership. This may be the time to
buy a home. Remember to consult your tax advisor.
- Deduct mortgage interest and real estate taxes.
The mortgage
interest deduction is perhaps the most popular home ownership tax
deduction. The tax code reads that you can deduct the interest payments used to
refinance or acquire your principal residence. This deduction can result in
homeowners lowering borrowing costs by almost a third. Many homeowners use this
tactic to turn high-interest credit cards and automobile loans into low
interest, tax deductible expenses. However, one needs to think carefully about
doing this. Although it does provide tax benefits
and a lower monthly payment, you are securitizing an unsecured debt with your
home in the case of credit cards. Therefore, if you don't make your second
mortgage payment, you will not only get a negative mark on your credit report,
you could lose your home
Read more: http://www.investopedia.com/financial-edge/1011/3-tax-benefits-for-homeowners.aspx#ixzz2NM5eSiRfInterest paid on home loans is deductible up to $1 million for a principal residence plus
a second home. Property taxes on all real estate are fully deductible.
Mortgage interest and real estate taxes are
deductible
- If you bought a home this year, deduct any money paid toward points
or origination fees. You cannot deduct closing costs.
Points paid
on a new mortgage loan for the purchase or improvement of a principal residence
are deductible for the year in which they were paid.As you know, mortgage interest is deductible. What many new homeowners do
not realize is the portion of interest generally paid upfront at the closing is
also tax
deductible.
If you purchase your home on any day other than the first of the month,
interest is due between the purchase day and the closing. Remember to take
advantage of this homeownership tax benefit. In addition, loan discount points
and origination fees are also generally tax deductible. Believe it or not, it
doesn't matter who paid these fees for the new homeowner to deduct them.
Therefore, even if the seller pays the costs, you can deduct them off of your
tax return
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Tax deductions for first-year home owners
- If you refinanced your mortgage this year or took out a loan to buy
a second home or investment property, deduct any points you paid equally over
the life of the loan.
Any points paid on a refinanced mortgage or a
loan to purchase a second home or income property must be spread over the life
of the loan. Some exceptions apply.
How to deduct points from a refinanced mortgage or loan for a
second home
- Deduct private mortgage insurance (PMI).
Taxpayers with
adjusted gross income of $100,000 or less can fully deduct premiums for private
mortgage insurance (PMI). The deduction is allowable only for insurance on loans
that were originated after Dec. 31, 2006, and before Jan. 1, 2011.
Deduct PMI from taxes
- If you moved 50 miles or more for a new job, deduct moving expenses.
If you relocated for a new full-time job at least 50 miles away
from your previous home, you can deduct the cost of packing, transporting or
storing your household goods.
Tax deductible moving expenses
- If you sold your house this year, see if you're subject to a capital
gains tax.
If the profit you received from the sale of your house is
under $500,000 for married couples or $250,000 for single owners, you are exempt
from the capital gains tax.
Sellers could be exempt from Capital Gains
tax
- Home improvements and mortgage closing costs are not tax deductible.
But, when you sell your house, they can be used to offset your capital gains tax
burden, should you have one.
Keep all receipts of permanent home
improvements and mortgage closing costs so they can be figured into the adjusted
cost basis of your home when you go to sell.
Remodel your way to tax deductions
- If you did a short sale this year, the debt forgiven by your lender
can be excluded from your taxable income.
Thanks to a new law, you
can exclude debt up to $2 million if it was discharged by the lender in 2007,
2008 or 2009.
Learn how forgiven mortgage debt can be excluded from taxable
income
- Take advantage of energy efficiency tax credits.
Going
green is good for the environment and your wallet. You can qualify for a tax
credit with documentation of energy efficient updates to your home.
Go green to save green
- If your home was damaged from a sudden, unexpected event, such as a
natural disaster, fire, vandalism, or theft, deduct some of the
loss.
You may deduct all expenses not covered by your homeowner's
insurance, minus a $100 deductible and 10 percent of your adjusted gross income.
Get tax relief after a natural disaster or
theft