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Taxes And Home Ownership
Talk about heavy finance!
With tax season in full swing and the real estate market finally bouncing back from the recession and "bust", what could go together better!
Here's a few tips and topics that might come up.
1. Property taxes -
If you have mortgage insurance, you can deduct the cost of the insurance from your tax bill. Certain home improvements can also carry additional tax benefits. $1 million in mortgage interest can also be deducted.
2. Divorcing Homeowners -
There are a few ways to handle this situation with various tax implications. First, one spouse can buy the other one out for an agreed upon price. Second option, you could sell the house together and split the proceeds with each person earning up to $250,000 tax free. Perhaps one of the two will stay in the house with the kids. Each scenario along with countless more will bring about a different tax burden or credit. Definitely consult with an accountant along side your attorney.
3. Capital Gains -
One of the best tax breaks available to the average home owner is the real estate capital gains tax law. The laws allow you to make up to $250,000 in profits from your home sale before you have to pay taxes. If married, it's $500,000 before taxes are owed. The home you sell must be your primary residence and it takes two years in order to use the exclusion again. If you want to manage your tax burden on an investment property, a great opportunity is the 1031 Exchange program.
4. Deductions -
One of the greatest advantages to owning rather than renting your home are the tax deductions one accrues. For starters, you can deduct the cost of mortgage points allowing you to lower your overall interest rate. Mortgage insurance can also be deducted along with your mortgage interest depending on your marital status.
Talk to a good accountant. If they know what they're doing and abreast of changes in the laws , there are plenty of ways that you can save money by owning your own home.
Ask Questions. Get informed. This is HEAVY stuff!
I am a licensed Realtor and not qualified to give financial or legal advice.
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