Loans |
Mortgage — Homeowner Tax Savings
Little-known tax breaks that can make a big difference:
While it is widely known that the interest paid on home loans can be tax deductible, home ownership also presents some tax-saving opportunities that many people have not heard about.
Here are a few examples of little-known tax savings for homeowners:
These are just a few examples of tax benefits available to you as a homeowner. Many factors will determine if any particular deduction is applicable in your situation — be sure to talk to an H&R Block tax professional to find out about this (and other) deductions that you may qualify for as a homeowner.
To find out about all of the loan options that are available to you, call now:
While it is widely known that the interest paid on home loans can be tax deductible, home ownership also presents some tax-saving opportunities that many people have not heard about.
Here are a few examples of little-known tax savings for homeowners:
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Borrowing to build a home? You may qualify for mortgage interest tax breaks.
If you take out a construction loan to build a home, you may be able to deduct the interest you pay on that loan (but only for the first 24 months from the start of the loan — even if the construction takes longer). However, after closing on the house, you can usually switch to deducting the interest you pay on your mortgage. If your town home or condo association pays taxes on your behalf, you may have another deduction coming. Some home owners associations pay real estate taxes for common property owned by those living in condos or town homes — these tax payments may be deductible. If you believe this is the case for you, be sure to get documentation on the amount paid on your behalf so you can claim that deduction. Borrowing to improve your home may cut your taxes when you sell it. Expenses from home improvements can create a tax advantage when you sell your home. Expenses for such work can be added to the cost basis of a home. When you sell the home, the increased basis reduces the taxable gain. Remember, though, if you have owned and lived in a home as a principal residence for two of the past five years, you can already exclude from tax up to $500,000 in profit if married filing jointly or $250,000 if single or married filing separately.
Here's an example. If you are single and sell a home for $500,000 and its original cost was $200,000, you would have a profit of $300,000 (of which $50,000 would be taxable). However, if you spent $50,000 in home improvements and saved all the receipts, you can add the costs of those improvements to the tax basis, making the original cost of the home for tax purposes $250,000 ($200,000 original cost of the home plus the $50,000 for improvements). The profit would then be only $250,000 — which may be completely excludable from federal (and often state) income tax. If you borrowed the money to make these home improvements by refinancing and taking cash out of your equity, you may also be able to reduce your taxes by taking a deduction for the interest paid on the new loan.
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These are just a few examples of tax benefits available to you as a homeowner. Many factors will determine if any particular deduction is applicable in your situation — be sure to talk to an H&R Block tax professional to find out about this (and other) deductions that you may qualify for as a homeowner.
To find out about all of the loan options that are available to you, call now:
* Not to be construed as a loan application or a commitment to lend. Rates are subject to change at any time and without advance notice.