Buying a home is a major financial commitment; however, taking this step affords the owner many significant tax benefits that they can enjoy year after year. The federal government has created these tax advantages in an effort to promote home ownership across the country. The tax rebate for first-time home buyers makes owning a home an even better deal. Here is a brief outline of the tax incentives of owning a home:
- Tax-deductible mortgage interest
Any interest a homeowner pays on a mortgage is deductible from their income taxes up to $1 million. In addition, if they take out a home equity loan, they may be able to deduct the interest on that loan up to $100,000.
- Property tax deduction
Any local or state property taxes that a homeowner pays on their property are deductible from their income tax. However, any money in an escrow account to pay future taxes is not deductible from income tax.
- Tax-free profits
When a homeowner sells their home at a profit, that money is not taxed up to $250,000 for a single homeowner or $500,000 for a couple. There are conditions, i.e., a homeowner can only claim this type of exception every two years; however, a partial exemption may apply to any profit from selling a home under unforeseen circumstances.
- Deductible moving expenses
If a homeowner buys a home at least 50 miles closer to their place of employment than their last home, the government allows the homeowner to claim moving expenses as a deduction. Naturally, there are some conditions that apply, such as the need for the homeowner to work full-time for at least 39 weeks the next year. Still, most of these conditions are very easy to meet for the overwhelming majority of homeowners. In order for homeowners to maximize the tax benefits of home ownership, they should speak with their financial advisor or accountant. The practical money-saving aspects of home ownership are benefits that a homeowner can enjoy year after year. If you need help buying or selling Louisville Real Estate, please contact Louisville Properties at 502.744.9504.
