1remodel480320-1

Owning a Home: A Taxpayer's Dream

It’s often been said that owning a home is the epitome of the American dream. It’s not only the American dream because you get to have your very own home and all of the nice things with it, but you also get all sorts of tax deductions that you would not have otherwise gotten. Here are the tax deductions that you will get when you have a mortgage.

Mortgage Interest – If you are married filing jointly, you can deduct every bit of your interest payments up to $1,000,000 in mortgage debt for a first or second home! This means that you are essentially getting a 30% decrease on the interest rate of your loan.

Home Equity Loan Interest – If you have a home equity loan or equity line of credit, you can deduct any interest that you pay on one of these loans. A couple married filing jointly can deduct up to $100,000 in interest for a home equity loan.

Interest on Home Improvement Loans – If you are making an addition or just remodeling the bathroom, you can deduct 100% of that money from your taxes. There’s no limit on the deduction, but you must actually be improving your home rather than making an ordinary repair.

Home Office Deduction – If you use a portion of your home exclusively for business purposes, you can likely deduct some of the cost in your home related to that purchase. In most cases it’s not a good idea to do this, because it’s a red flag that will put you up for an audit.

Points and Origination Fees – Mortgage lenders will charge you a variety of fees, one of these is called a “point”. Essentially it’s prepaid interest which gives you a lower interest rate on your mortgage. You can deduct any points that come along with purchasing a home from your taxes.

Moving Costs – If you get a new job and have to move, you might be able to deduct some of the moving costs for your new job. Unfortunately, there are some fairly complicated requirements to get this deduction.

Capital Gains Exclusion – Thanks for the Taxpayer Relief Act of ’97, couples can sell their home tax free without any capital gains and take a profit of up to $500,000 without taxes! In order to qualify for this, you must live in the home for at least the last 2 years.

Property Taxes – If you pay any state property taxes, you can fully deduct these from your income. You cannot deduct any escrow money which is held for you until the money is actually used to pay your property taxes.

Recommended Reads....


Please Share Us:
Votes 136

Rating: 4 out of 5

Site Disclaimer: This site is designed for educational purposes only, if you click on a link and make a purchase I will make a small commission. Furthermore, all videos and photos on this site are provided by 3rd parties. We take no responsibility for the content on any website which we link to, please use your own discretion while surfing the links.

Frontier Theme

Enjoy this blog? Please spread the word :)