Owning a home is expensive, but don't forget about the silver lining: tax benefits. Tax advantages accompany home ownership at every stage of the process, according to an article published by Realtor.com. When you first buy your home, in most cases, loan discount points and origination fees are tax deductible to the buyer, regardless of who pays them. Tax benefits accompany the purchase of many different types of homes, including single family homes, condos, apartments, town homes, and even motor homes and houseboats--so long as there are cooking, sleeping and bathroom facilities.
When financing your home, you can deduct mortgage interest used to acquire or improve your principal residence in the year that it is paid (although the IRS does limit the amount you can deduct if your loan exceeds $1 million). This is especially meaningful during the early years of a home loan, in which interest accounts for a large portion of monthly payments. For people in the 28% federal tax bracket, this can cut borrowing costs by nearly one-third. Furthermore, you can deduct interest on an additional $100,000 of mortgage debt at any time, to be used for any purpose. Mortgage interest on a second home is also fully deductible--just be sure that the IRS cannot declare the home a residential rental property, which is not eligible for the same tax deductions. According at an article published by Bankrate.com, you must vacation at least 14 days at your second property or spend there more than 10 percent of the number of days that you rent it out--whichever is longer--in order to be eligible for mortgage interest tax deductions.
Finally, selling your home also provides significant tax benefits. If you have owned and ouccipied your principal residence for at least two of the past five years, you can earn up to $500,000 for a married couple and $250,000 for a single person on the sale of that house and pay no federal income tax.
For information about the tax deductions associated with investment property, click below:
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