Are you familiar with the numerous tax benefits of homeownership? There are lots of benefits that come with owning a home, including benefits that may result in tax savings for you, the home owner! In this week’s blog, we’ll talk about some of the tax benefits that come with owning a home. As always, please consult with your tax advisor for advice on your specific situation.
4 Tax Benefits of Homeownership
Mortgage Interest Deduction
If you itemize your federal income tax deductions, you can deduct 100% of your mortgage interest payments on a first or second home for up to $1 million of mortgage debt. At tax time you will receive a form from your lender called the Mortgage Interest Statement Form 1098, which tells you home much you paid in home mortgage interest over the year. In addition, you can also deduct interest paid on up to $100,000 of home equity loans.
The bottom line? “For most home owners, this means they can deduct all of the mortgage interest they’ve paid on their home each year,” according to the National Association of Home Builders.
Real Estate Tax Deduction
As long as you don’t rent out your home, you can deduct state and local real estate taxes you pay on it every year.
Capital Gains Exclusion
Thinking of selling? If so, you may not have to pay capital gains tax on the profit you make from the sale. If you’re a married couple who has owned and occupied the house as a principal residence from at least 2 of the past 5 years, you don’t owe any taxes on the first $500,000 in profits from the sale of the home. If you’re single, the same rules apply, but you won’t owe taxes on the first $250,000 of profits from the sale.
Mortgage Insurance Premium Deduction
If you put a down payment of less than 20% on your home, you have to buy mortgage insurance. However, the premiums on the mortgage insurance can be deducted from your taxable income.
Lifetime Series Homes: Your Home Builder in Maryland
Lifetime Series Homes is a home builder in central Maryland that offers fast construction of semi-custom homes. To learn more about building your new home with Lifetime Series homes, contact us today at 410-549-4443! You can also keep up with us on our blog as well as on Facebook, Twitter, Google+, Pinterest and YouTube.