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.
- 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:
- Points on primary residence deductible immediately; on 2nd homes, deductible over course of loan
- Real estate taxes for the part of the year you own property