Real estate agents should never give their clients detailed tax advice. As a Realtor, we are licensed to h
elp our clients buy real estate, not serve as their professional tax expert.
With that being said, the tax benefits or real estate ownership is something every buyer and every agent working with buyers should understand.
Tax benefits of buying a home include:
- Home mortgage interest deduction: The interest paid on a mortgage or mortgages of up to $1million for a principal residence and/or second home is deductible as an itemized deduction. Most payments in the early years of a home’s loan mostly consist of interest, so this is an important deduction.
- Home equity loan deduction: Homeowners can borrow up to $100,000 against the equity in their home and deduct the interest as an itemized deduction.
- Property tax deduction: Homeowners can deduct from their federal income taxes the state and local property taxes they pay on the home.
- Deductible expenses related to buying transaction: Various closing costs normally involved in a home purchase are also deductible; loan origination fees (points), prorated interest on a new loan, and prorated property taxes paid at settlement.
- Home Sale exclusion: One of the greatest tax benefits of homeownership is when a person sells the home for a profit. Homeowners who lived in their home for 2 of the prior 5 years prior to its sale will not have to pay income tax on a huge amount of their profit. $250,000 for single homeowners and $500,000 for married homeowners who file jointly. This exclusion can be used once every 24 months.
- Rental income- A little known tax benefit of homeownership is that the owner can rent it out for up to 14 days during the year and pay zero tax on the rental income.
Again, as a real estate agent, I am here to help you find the home of your dreams. If you need detailed tax advice, please contact your tax adviser. If you need any information regarding real estate in and around the Katy/Houston area, please feel free to contact Angela Kraushaar at 713-253-5678 or Angela@AngelaKhomes.com or check out my main website here: Katy Real Estate or here: Cinco Ranch Real Estate. I would love to help you find the home of YOUR dreams!
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Angela – Thanks for the great information – I have my computer set up so that I get ALL your blogs each morning when you post something new and I read everything you put up – I’m glad my friends used you for their purchase – they are very happy with you!