It long been understood that there are considerable financial benefits to owning a home. You are paying money into an actual asset, instead of into your landlord’s bank account, after all. But beyond this basic financial benefit come some other advantages as well, particularly when it comes to tax time.
LL Realty Inc. has built a very successful business by addressing the multiple needs associated with property management. We offer buyers and sellers the expertise and support to generate the greatest revenue for their properties. Our key differentiation is that we are small company that offers a very personal and superior level of service.
There are several common tax deductions that homeowners can claim, including:
Capital Gains Exclusion
The capital gains discharge from selling your home is easily the most substantial tax benefit an owner gets from ownership. When you sell your home — hopefully for more than you bought it for — you get to keep the profits up to $500,000 when you are married and $250,000 if single. When you consider that selling other investments, like stocks or bonds, is often taxed at around 15%, you can see why this is such a great benefit. You have the potential to walk away with up to half a million dollars without paying taxes.
Typically these profits are used to buy another home, which is why the tax system is arrange this way. You take your tax-free money and invest it in more real estate — the smart move for you and the economy. The latest version of the capital gains elimination was a tax advantage that was put into place in 1997. You can read about real estate capital gains taxes in our complete article that explains everything you need to know on the subject. Find out who is suitable and who isn’t. See some other feed of the law you may not be familiar with including the military tax exclusion, nuptial death exclusion and the wealthy tax loophole that was closed.
Wherever you buy your home, you can await to pay some property taxes. The local school district, the county and the town or city itself may all need funds every year to provide services to the community where your home is located. Usually based off of the check value of the house, property taxes are an amount that every homeowner needs to plan for. They can be costly, especially in some regions of the country.
One bonus that comes from paying those taxes, though, is that you can deduct them from your yearly tax bill. You could easily wind up reduce $4,000 or $5,000 a year just from property taxes. Again, a assumption that everyone can enjoy. The amount you can deduct should be discussed with your accountant when preparing your yearly taxes.
For most people, paying a 20% down payment on a new home is just not possible. Unless you make a considerable amount of money from your job, enjoy some heritage or have help from your family, 20% is often too heavy an amount for most people to come up with. In fact, many people incorrectly assume a small down payment avert a buyer from purchasing a home. This is certainly not the case. The cost of not having a 20% down payment, however, is that you have to take out mortgage insurance in most circumstances.
Fortunately, you should be able to deduct the cost of your contract insurance off of your tax bill, as long as you make less than $100,000 a year. If you make between $100,000 and $109,999, you may also be able to deduct a portion of your mortgage insurance payment. Most people who claim this deduction enjoy a sizable deduction amount, averaging around $1,000.
As of now, the mortgage insurance deduction has not been renewed by Congress for 2015. If it is not renewed, you will not be able to use this deduction. However, Congress typically waits to renew this particular deduction until the end of the year, so there is hope that it will be there when you file.
There are more than just tax benefits for owning a home. Over the long haul, a home is an investment. While owning a home each month you are building equity in the property every time you make a mortgage payment. Even though we have just come out of one of the toughest times for real estate in decades, historically it is a wealth builder. In fact, from a long-term perspective, it is one of the best investments you can hold.