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Homeownership Tax Benefits
There are three major tax benefits for homeowners: deductibility of mortgage interest,
deductibility of real estate taxes, and the capital gain tax exclusion for principal residences. Taken together, these benefits significantly reduce the cost of homeownership. Each represents a significant provision of law.
As seen in these estimates, the largest benefit for most homebuyers is the ability to deduct home mortgage interest. The tax code permits homeowners who itemize their
federal income tax deductions to reduce their taxable income by the annual amount of mortgage interest paid on a first (and second) home, up to $1 million in total home mortgage debt. Further, taxpayers may deduct interest allocable to up to $100,000 of home equity loans.4 For the purpose of the Alternative Minimum Tax [AMT], taxpayers may deduct non-home equity loan interest from AMT taxable income as well. Itemizing homeowners may also deduct state and local real estate taxes paid on an owner-occupied home.
Finally, taxpayers may exclude from capital gains taxation the proceeds from the sale of
Call us today to start the process of buying a home and take advantage of these tax savings.
Derek Gutting, The Gutting Group, Keller Williams Realty,
317 846-4888 direct, dgutting@kw.com
a principal residence. Taxpayers are limited in the amount of gains that may be excluded from tax: $500,000 of gain for married homeowners and $250,000 for single homeowners. Recent changes in tax law reduce these maximum exclusion amounts proportionally for the amount of time the home is actually used as a principal residence. Periods of ownership prior to January 1, 2009 are treated as periods of principal residence use under a grandfathering rule included in the law. Consult your tax advisor for further information.
