"Almost everyone knows that it's better to own your house than to rent it. After all, when you pay rent, it goes to a landlord and when you pay down on a home, it goes to a future investment in a valuable item. But did you know that owning real estate can have other advantages, too? Specifically, did you know that there are a number of tax benefits to owning real estate that those people who just rent will never be able to take advantage of? If you've been thinking about purchasing a home but haven't yet made the plunge, here are some of the tax benefits that you might want to think about:
Ã?â‚?? Closing costs. In the year that you first purchase your home, you can deduct some of the closing costs on your taxes. This is true even if the seller was the one that paid your closing costs, meaning that you're basically getting free money. This is only good in that first year, though, so you need to know about it in advance.
Ã?â‚?? Home mortgage interest deductions. Every year, you pay mortgage on your home. And every year, you can deduct the interest of that mortgage from your taxes. Interest is deductible on any amount up to one million dollars of home mortgage - so unless you're buying a mansion, you can probably deduct all of your home mortgage interest.
Ã?â‚?? Home equity interest deductions. When you take out a home equity loan, it will also have interest and this interest is also deductible on your taxes. Interest on up to $100,000 of home loan debt can be deducted.
Ã?â‚?? Real estate tax deductions. You have to pay real estate taxes but you can get some of that money back as a deduction at tax time.
Ã?â‚?? Remodeling improvement deductions. If you make major changes to your home, you may increase its value which ups the tax basis and saves you money later on.
Ã?â‚?? Sale of your home. In the future, when you go to sell your home, you can actually get a tax break on the money that is earned from the sale. There are some rules to follow here (and it's always best to work with a realtor and a tax attorney to make sure you've followed them correctly) but basically, if you lived in the home for at least two years, you can get at least $250,000 from the sale of the home tax-free.
Buying a home has a number of different benefits that you can probably think of on your own. But you might need help figuring out all of these tax benefits. Working with a professional who is knowledgeable about the ins-and-outs of home ownership tax deductions can help you to save money each and every year that you own your home. This means that when income tax time comes around and all of the renters that you know are groaning that they have to send money to the IRS, you'll be smiling and tucking your savings away."
