And, at tax time, home owners can take advantage of several sources of tax savings, including:
- Deductions for mortgage interest
- Deductions for real estate taxes
- The capital gains exclusion for the sale of a principal residence
Home owners who itemize their federal income tax deductions can deduct 100 percent of their mortgage interest payments on a first or second home for up to $1 million of mortgage debt. The Mortgage Interest Statement Form 1098, which home owners receive from their lenders, shows the total amount of home mortgage interest paid during the year.
Homeowners also can deduct the interest paid on up to $100,000 of home equity loans.
For most home owners, this means they can deduct all of the mortgage interest they’ve paid on their home each year.
Real Estate Tax Deduction
Home owners are able to deduct the state and local real estate taxes they pay each year on an owner-occupied home.
Capital Gains Exclusion
When it is time to sell a home, in many cases home owners don’t have to pay capital gains tax on the profit from the sale. Under present law, married couples who have owned and occupied their principal residence for at least two of the past five years do not have to pay any taxes on the first $500,000 in profits from the sale of their home. Single filers earn up to $250,000 tax free.
Additional Tax Savings
Another deduction home owners may be able to take is for mortgage insurance premiums. Generally, people who purchase a home without putting 20 percent down have to buy mortgage insurance, and those premiums can also be deducted from taxable income.
Even home owners who don’t use the home as their principal residence and rent it out may be able enjoy some tax benefits, including interest and depreciation deductions.
Preserving the Mortgage Interest Deduction
Buying a home offers tax savings that can add up to tens of thousands of dollars over several years. Home owners rely on the mortgage interest deduction each year to help offset the costs of homeownership and prospective buyers take the deduction into consideration when choosing homeownership over renting.
That's why it's important for policymakers to preserve the mortgage interest deduction, which has been included in the tax code for more than 100 years. It supports the aspirations of families at all income levels to become home owners, and Americans overwhelmingly oppose any action by Congress to tamper with the deduction.
Learn more about the importance of the mortgage interest deduction at ProtectHomeownership.com.
For more information about this item, please contact Anne Baker at 800-368-5242 x8447 or via email at email@example.com.