Financing-home loans, Real Estate

Tax Advantages to Home Ownership

This is from Weichert Market Monitor

Focusing on Housing Tax Breaks by Tim McLaughlin

Your home is probably brimming with tax advantages. Do you know about all the breaks you are entitled to? Obviously, you should always consult a professional tax advisor for details, but here’s a list of the top 5 tax deductions for homeowners:

1. Mortgage Interest – Mortgage interest on a home is usually fully tax deductible. You can deduct interest on multiple mortgages, as long as they do not exceed $1 million. The purpose of the mortgage must specifically be to buy, build or improve a home.

2. Points Paid on a Purchased/Refinanced Loan – If you refinanced, you may be able to write off any points you paid to buy down the mortgage rate. To do this, you deduct the points proportionately over the life of the new loan. For example, if you took out a 30 year loan, you would deduct 1/30th of the points you paid each year. Remember, if you’ve refinanced before, and you have points from the previous refinance that you haven’t finished deducting, you can write off the rest of those points in the year you refinance. If you bought your home last year, the points you paid at closing are deductible on your income tax statement for that year. If the seller paid some (or all) of your points for you, you may be able to deduct those seller paid points too!

3. PMI – extended through 2010! Late in 2007, Congress extended the tax deduction for homeowners paying private mortgage insurance through 2010. This one has some restrictions: for example, the borrowers must have an adjusted gross income under $110,000.

4. Capital Gains with No Income Taxes Thanks to the 1997 Tax Act, once every two years, single homeowners can realize a tax-exempt profit of up to $250,000, as long as the seller owned and occupied the home as a principal residence during any two of the last five years. Married homeowners who file jointly on their tax returns do not have to pay taxes on up to $500,000 of gains when they sell their primary residence.

5. Refinance – Well, sure, I guess this one isn’t really a true “tax break”, but when you reduce your payment and/or loan term at historically low interest rates, it will feel like one. Need help refinancing? Ask us how!

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