Homeowner Tax Benefits
I came across the article “Home Sweet Homeowner Tax Breaks” by Kay Bell at bankrate.com. I thought I would share the highlights which are useful in evaluating some of the benefits of owning a home:
For most homeowners, the largest tax break is reflected in their mortgage payment. All of the interest payments are deductible for mortgages less than $1 million. At the beginning of each year, banks will deliver each borrower a statement which shows how much interest he or she paid that year. Homebuyers also typically pay some advance mortgage interest at closing, which is also deductible.
A large portion of most monthly loan payments is property taxes. Homeowners can deduct these tax payments each year. If this is your first tax year in your new home, look at the settlement statement you received at closing. When the property was transferred, the year’s tax payments were prorated, which are also deductible.
If you paid points to obtain a better rate for the loan on your primary residence, they also offer a tax break. The buyer’s down payment must exceed the value of the points charged in order for the points to be deductible and the points must appear properly on the HUD1.
Selling your home
When you decide to move into a new home, you may be able to avoid some taxes on the profit made from the sale of your home. Up to $250,000 in sales gain (or $500,000 for married joint filers) is tax free as long as the seller owned the property for two years and lived in it for two of the five years before the sale. If a homeowner is forced to sell under unforeseen circumstances, homeowners may receive some tax relief even if they do not meet the criteria above.
*Anderson Homes does not guarantee the accuracy of any of these statements. Please consult with your accountant or tax advisor. Please visit “Home Sweet Homeowner Tax Breaks” for the full article.