The costs of house ownership are numerous, and ultimately, no one should have to pay more than they have to in taxes. There is a lot of various tax deductions that have been instituted to save money for homeowners.
The first one is only applicable to sellers. Capital gains applies to homes, since capital gains is just a tax on a general increase in assets. For homes, it’s the difference between what you paid for it, and what you sold it for. However, according to the Tax Relief Act of 1997, singles don’t have to pay on the first $250,000 in profit, and married couples don’t have to pay anything on the first $500,000.
You can also make deduction on certain kinds of interest on home-related loans. The first is mortgage interest. You can deduct up to a million dollars for married couples, or $500,000 if the couple files their taxes separately. This only applies to the first and second homes you own, and obviously will not be included if you pay cash. A different mortgage interest tax credit is mortgage credit certification. Low-income families can get 20% of their loan, or up to $2,000, in tax write-offs on what they pay in home interest every year.
Other mortgage related deductions include deductions on private mortgage insurance, but only on loans taken after 2006. The amount a married couple can deduct will start to decrease around $50,000 yearly, and you will not qualify if you make over $106,000 a year. Related to this, what that means is that the amount you will be able to deduct is based on what you make. Since most lenders require PMI this one will be applicable to a large section of the population.
While not related to purchasing a home, this one is related to home ownership. Often times since lenders require some kind of collateral or history to give out loans, many lenders will give out equity loans. These are based on the amount of your house you own. You can deduct up to $50,000 per person on these kinds of loan. More specifically, you can deduct all of the interest from these loans. The amount is calculated by dollar amount of ownership minus what you owe on other home related debts.
If you use your home for certain economic activities, you can also deduct payment. There is an agriculture deduction, which is for anyone who grows food or ranches on their land. This one is great for those with a large amount of land, and can even apply to those who only use farming and ranching as a small portion of their income. Another one is for home offices. If you have insurance or made any changes, you can use that to deduct. For example, installing bookshelves or putting in new internet wiring would apply.
If you’re looking for San Marcos real estate information or help buying or selling your home, contact us today to discuss your needs! We’d love to hear from you and would be happy to help in any way possible.
