Home Buyer's Guide - closer look at...
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.
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.
Mobile: (410) 231-8873
Libby Fall, Principal Broker
Fall Fine Homes, LLC
12771 Mill Creek Drive
Lusby, MD 20657
Office: (410) 231-4944