As Tax Season approaches, it is important to remember some of the perks of home ownership. Homebuyers can potentially take advantage of many tax benefits.
Here are a few key ones...
Mortgage Interest Deductions - As long as your mortgage balance is smaller than the price of your home, mortgage interest is fully deductible on your tax return. Interest is the largest component of your mortgage payment. In some cases, you may also deduct homeowner's association fees and property taxes.
Property Tax Deductions - Real estate property taxes paid for a first home and a vacation home are fully deductible for income tax purposes. In California, Prop 13 limits property tax increases to 2 percent per year or the rate of inflation, whichever is less.
Capital Gain Exclusion - If you've lived in your house for two of the past five years, you can exclude up to $250,000 for an individual or up to $500,000 for a married couple of profit from capital gains.
Preferential Tax Treatment - If you receive more profit from the sale of your home than the allowable, that profit will be considered a capital asset as long as you owned your home for more than one year.
Building Equity - Over time, you may be able to use the equity you build to fund home improvements, or pay off other high interest debts, such as credit card debts or student loans.
*Consult your accountant for verification*