If you’re one of the millions of Americans left feeling deflated following the recent tax deadline now could be the time to make the leap and get on the property ladder.
If your rebate was less than you hoped or even worse you were left owing even more money to the government, buying a property could see you better off this time next year.
We’re not suggesting just buying a house because of the tax benefits but if you’ve been thinking about taking the leap anyway now is as good a time as any!
Here are four ways owning a home could save you money on your taxes, taken from the Tax Policy Center’s Briefing Book -“A citizen’s guide to the fascinating (though often complex) elements of the Federal Tax System”.
Mortgage Interest Deduction
“Homeowners who itemize deductions may reduce their taxable income by deducting any interest paid on a home mortgage. The deduction is limited to interest paid on up to $1 million of debt incurred to purchase or substantially rehabilitate a home. Homeowners also may deduct interest paid on up to $100,000 of home equity debt, regardless of how they use the borrowed funds. Taxpayers who do not own their home have no comparable ability to deduct interest paid on debt incurred to purchase goods and services.roperty Tax Deduction
Property Tax Deduction
“Homeowners who itemize deductions may also reduce their taxable income by deducting property taxes they pay on their homes.
“Buying a home is an investment, part of the returns from which is the opportunity to live in the home rent-free. Unlike returns from other investments, the return on homeownership—what economists call “imputed rent”—is excluded from taxable income. In contrast, landlords must count as income the rent they receive, and renters may not deduct the rent they pay. A homeowner is effectively both landlord and renter, but the tax code treats homeowners the same as renters while ignoring their simultaneous role as their own landlords.”
Profits from Home Sales
“Taxpayers who sell assets must generally pay capital gains tax on any profits made on the sale. But homeowners may exclude from taxable income up to $250,000 ($500,000 for joint filers) of capital gains on the sale of their home if they satisfy certain criteria: they must have maintained the home as their principal residence in two out of the preceding five years, and they generally may not have claimed the capital gains exclusion for the sale of another home during the previous two years.”