Real Estate Tax Tips

Tax basics for owning your own home.

Q. Why should I own my own home? How Owning Real Estate is a Tax Advantage

  • You can generally deduct your real estate interest and taxes for your primary residence and second home on your income taxes.
  • You don’t pay tax on $250,000 if single ($500,000 if married) of gain on the sale of your primary residence if you owned and lived in house for at least 2 of 5 years before its sale.

In other words, you get to live in a home, get to deduct major costs of owning it, and then not pay income taxes on the gains you get when you sell it.

What’s deductible?

  • Interest on home acquisition loans up to $1,000,000 ($500,000 if married filing separately).
  • Interest on home equity loans up to lesser of $100,000 ($50,000 for married filing separately) or fair market value of first and second homes minus outstanding mortgages
  • Interest on home construction loans up to $1 million for up to 24 months after construction begins
  • Interest on home improvement loans if for improvements, not repairs
  • Interest is only deductible if your debt is secured with your home put up as collateral.
  • Real estate taxes
  • Refinancing points deducting over the loan period except if loan used for home improvements
  • Deductible closing costs:
    1. Points on primary residence deductible immediately; on 2nd homes, deductible over course of loan
    2. Real estate taxes for the part of the year you own property