Tax Advatanges for Home Buyers

Most buyers look at their home as a place to relax, entertain, and raise their family. But did you know that owning a home is also one of the best investments you can make?

Homeowners can take advantage of exclusive tax savings, from annual income tax deductions to deferment of capital gains when you sell your home. As always, we recommend consulting your tax professional for specific details.

Income Taxes

As a homeowner, be sure to take advantage of these deductions, which can add up to major savings on your income tax each year:

• Points - Did your loan include points you paid to the lender? Points paid out of pocket are fully deductible in the year they are paid. If points were included in your total loan amount, they are deductible over the life of the loan.
• Property Taxes - The annual taxes you pay on your home and property can be deducted each year.
• Mortgage Interest Payments - In most cases, you can deduct all of the interest paid on your mortgage. Plus, any penalties incurred for early loan repayment are considered tax-deductible interest.

The tax advantages of homeownership continue as long as your interest, real estate taxes, and other deductions exceed the standard deduction.

Capital Gain Tax

If you've lived in your home for at least 2 years and it serves as your principle residence, current tax laws allow for certain capital gain exemptions when you sell: if filing jointly, $500,000 of your capital gain is exempt from tax; if filing singly, the exemption is $250,000. What's more, this is no longer a one-time benefit. If your next home fits the criteria, the same exemptions will apply (of course, barring any changes in the tax code).

Detailed records of home ownership expenses will also come in handy when it comes time to sell your home. Certain expenses can be added to your original cost to reduce capital gains:

• Survey and appraisal fees, title insurance, and brokers' commissions when you bought the house.
• Cost of the improvements you made, such as putting on an addition, remodeling your kitchen, or replacing the roof.

For more Information, Contact Lawrence Today!