We are all aware that renting offers zero tax breaks, however buying a home offers several tax benefits that can make homeownership more affordable. Real estate professionals can not provide specific detailed tax advice to clients due to license restraints, but you can be assured they will have the information needed to understand all of the tax benefits of home ownership. For a complete list of potential tax benefits consult a CPA. The following is just a few of the tax benefits to home ownership: - Home mortgage interest deduction: Home owners can take an itemized deduction on interest paid on a mortgage or mortgages of up to $1 million for a principal residence and/or second home. This deduction could potentially reduce the cost of borrowing by one-third or more.
- Property tax deduction: Home owners can deduct from their federal income taxes the state and local property taxes that you pay on the home.
- Deductible home buying expenses: Several closing costs in a home purchase are also deductible, such as loan origination fees (points), prorated interest on a new loan, and prorated property taxes paid at settlement.
- $250,000/$500,000 home-sale exclusion: Home owners who have lived in their home for two of the prior five years prior to its sale do not have to pay income tax on the majority of their profit — $250,000 for single home owners and $500,000 for married homeowners who file jointly.
- 14 days of free rental income: Home owners can rent the home up to 14 days during the year and pay no tax at all on the rental income. Home ownership continues to be one of the greatest investments a person can make.
To learn more about how you can own a home please call or email me.
Pamela Efferson, Realtor
GRI, SRES, ASR, CSR, HRC
Member HAR, TAR, NAR, WCR
713-822-8555
Source: "The Tax Benefits of Homeownership," Inman News (Feb. 4, 2011)
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