Homeowner Tax Breaks
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.
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Increased Basis for ImprovementsMoney 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.
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