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. As of tax year 2018, new limitations have been put in on both real estate interest and 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.
- Up to tax year 2018, interest on home acquisition loans up to $1,000,000 ($500,000 if married filing separately) was deductible. As of January 1, 2018, you can deduct the interest on up to $750,000 in mortgage debt used to purchase or improve your home. Debts acquired before 2018 are still deductible as long as they are for purchase or home improvement.
- Up to 2018, 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. As of January 1, 2018, this deduction is eliminated.
- 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. Up to tax year, 2018, real estate taxes were deductible. As of January 1, 2018, real estate and state income taxes are subject to a $10,000 cap. Please note that in some states like New York these caps and other Schedule A revisions are not being observed by and may still be deductible.
- 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