We all know that real estate and home ownership can be a terrific investment, and one reason for that is because there are many tax advantages to home ownership. So while you are building equity for the future, you can also get some nice tax savings in the present. A nice trade-off for all the hard work you put into it, right?
The big one is writing off your mortgage interest. At the beginning of your mortgage term, most of your payment goes towards the interest, so this is a significant amount when April 15th rolls around. You can also deduct the cost of your real estate and property taxes from your income.
Did you refinance? You might be able to deduct the points you paid. Also, if you paid extra points to lower your initial interest rate, those might be eligible for a deduction.
Then there is the capital gains for your primary residence. You can deduct up to $250,000 of your profits when you sell your home if you lived in it for at least 2 of the previous 5 years before the sale. Plus, you can get $500,000 if you are married.
In addition to these biggies, there are all sorts of nooks-and-crannies in the real estate tax codes, like reducing your taxable gain with receipts for home improvements, deductions for home offices, and more. Always consult with a tax professional who knows the ins-and-outs of real estate taxes. If you need a referral or just have a question, please let me know. I am always happy to help. I can be reached at 510-547-5970 x57 or MSmartt@jps.net.
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