Owning a home can be costly – yes we can’t escape these kinds of expenses tied with owning a home; utilities, repairs, property taxes, mortgage interests, the list could go on. Luckily, there are tax breaks to encourage more people to buy a home.
In many ways, there are certain benefits when you purchase a home. Let’s start with federal income tax. Homeowners have opportunities for more federal income tax deductions than renters. How? When you own a home you can subtract the interest you pay on your mortgage loan and your property taxes from your total income. The deduction of mortgage interest from tax obligation is a significant benefit because interest payments can be the largest component of your mortgage payment in the early years of homeownership. In addition to your mortgage interest, the interest you pay on a home equity loan can be tax deductible as an itemized deduction. You can save thousands of dollars from these deductions.
Moreover, the first year you buy your home, any points (origination fees) you paid to the lender as part of getting your mortgage loan also count as deductions from your income. You can deduct the full cost of any loan origination fees or points as long as the lender calculates them as a percentage of your loan, whether you or the seller paid them at closing.
You can also get tax credits for moving. If you moved because of your job, whether it’s a new job or working at the same company in a different location, you may be able to deduct your moving expenses on your income tax return.
You can also get a tax break when you sell your home. Let’s say you purchased your home for $150,000 and was able to sell it for $200,000, you have $50,000 profit. The federal government imposes capital gains tax to people who earn profits from selling valuable possessions. For homeowners who lived for at least two of the past five years in their home, they are excluded from capital gains tax. Meaning, that 50,000 is non-taxable! When you sell a home, you can keep profits up to $250,000 if you are single and up to $500,000 if you are married.
If you haven’t purchased a home yet, now is the time to consider owning a real estate. Renters don’t get many tax breaks. It may be cheaper to rent now but in the long run, renting becomes more expensive than buying a home. Instead of paying off your landlord’s property why not pay off a home you call your own?
Looking to buy? Are you a first time home buyer? We can help! The J Michael Manley Team go above and beyond to help you find the perfect home, from searching the right property that meets your real estate needs until you finally sign the deal. We will walk you through the process and make sure that you get the best deal possible. Are you ready to find the right home?
Contact us or Call us at 864-881-1258