Tax Benefits of Owning a Home

Posted by Website Programmer on Thursday, August 30th, 2018 at 2:09pm.

Owning a home is one of the greatest American dreams. You get to decorate it as you like, customize your bedroom, or accessorize with the latest art painting. But did you know that having your own home comes with financial benefits?

 

Before you got a home, all the money went to the landlord, and nothing came to you as a tax deduction. However, once you buy a home, you’re entitled to some tax breaks. What’s more, these benefits do not only apply to single-family homeowners. Condominiums, apartments, townhouses, and mobile homes are all eligible as long as you are entering into a mortgage contract.

 

Here are some top tax benefits of owning a home.

 

Mortgage Interest Deductions

The fact that you can subtract any mortgage interest that you pay is one of the most important tax benefits of homeownership. This means that you can subtract the interest paid on debt as a result of a loan that was used to buy, build or improve the home if you itemize deductions on Schedule A of your federal income tax return.

 

The only catch is that the loan needs to be secured to your home, you can enjoy up to one million dollars of home acquisition debt or half a million dollars if you are married and filed separately. However, varying rules apply if you got your loan before October 1987.

 

Home Improvements and Repairs

If you decide to re-insulate your home, upgrade your air conditioner, or go for an energy-efficient water heater, you’re eligible for an energy credit. The credit is 30% of the cost of energy efficient home improvement. Also, the credit has a total maximum of up to $500. It’s, therefore, essential to seek advice before you decide to buy any energy credit item.

 

Repairs are considered an improvement if they are performed as part of a huge remodeling project of your home.

 

Exclusion of Capital Gain

One of the significant benefits of owning a home comes when you’re selling. If you decide to sell your property at a gain, you can deduct some or all of the gain from the federal income tax. Capital gain is calculated by deducting the cost of the property from the sale price of your home.

 

You can be excluded from the federal income tax by up to $500,000 if you are married and file a joint return or $250, 000 of any capital gain that was as a result of the sale of your first residence. The only condition is that you need to have lived in the house for at least two years before the sale.

 

Mortgage Tax Credit

If you’re a first-time home buyer, a home buying program called Mortgage credit certificate allows low-income buyers to enjoy a mortgage interest tax credit of 30% of the mortgage interests paid on a home. You’ll need to apply via your local or state government to get the certification. Moreover, the credit is available every year you live in the house and keep the loan.

 

Buying a home is a huge investment. The best part is that you can take advantage of the tax exemptions to save more money.

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