James R. Kay,
Helping you keep more of what you earn !
The Tax Benefits of Home Ownership
There are several financial advantages that come with buying and owning a
home, including some significant tax benefits.
you buy a home, you typically pay points, also called discount points or
origination fees, to the lender (see lines 801 and 802 of your HUD-1
statement). These points
are considered pre-payment of the interest on your mortgage so they are
tax-deductible. A point is
equal to 1% of the loan amount and a home loan will typically include
one to three points, so this can add up to a sizeable deduction.
Depending on the purpose of the loan, you may be able to deduct
all of the points in the year you paid them or you may have to deduct
them over the term of the loan.
can also deduct the interest you pay on your mortgage each year for a
first or second home. This
can be a big savings, since most of your payments for the first several
years go primarily toward the interest.
can also deduct property taxes paid from your escrow account, or paid by
you directly, to the taxing authority during the year.
Equity Loans or Lines of Credit
you have a home equity loan or line of credit for $100,000 or less (or
$50,000 or less if you are married and filing separate tax returns), you
may be able to deduct the interest on your taxes.
A home equity loan or line of credit lets you tap into the equity
of your home and can be a great way to cover home repairs or pay off a
high interest rate credit card. It
doesn't matter how you use the money; the interest may still be
you use part of your home as an office for your business, you may be
able to deduct a pro-rata part of the maintenance costs, utilities,
insurance and depreciation on your tax return.
Claiming a home office deduction will not impair your ability to
exempt the gain from taxation when you later sell your home.
Gain on Sale of Home
you sell your home, some or all of the gain may be tax-free if you have
lived in the home for 2 out of the last 5 years.
Some limitations and exceptions apply, so talk to your accountant
about your own situation.
to Your Accountant
You should speak with your accountant to find out how you can take advantage of these tax breaks homeowners.
Caution - Content on this page is general in nature. More specific rules and limitations may apply to your situation. Always seek the advice of a tax professional before making important financial decisions.