It also provides a lot of tax breaks.
As presidential candidates and the Joint Select Committee on Deficit Reduction, aka the Super Congress or super committee, debate possible changes to our tax system, you can bet that discussion on housing tax breaks will be part of the heated discussion.
So while we still have them around, this week's Weekly Tax Tip (sorry for being a day late; it was a crazy Wednesday that looks to be extending its madness into today!) looks at home sweet homeownership tax benefits.
Here are some highlights:
- Mortgage interest on home loans up to $1 million. Interest on home equity loans generally counts, too, if it's for a debt of $100,000 or less. So does interest on a loan to buy a second home.
- Points paid to get a lower mortgage rate also are deductible. So are the points when you refinance, but these might not be deductible all at once.
- Property taxes can be itemized to help reduce your tax bill. You can deduct not only real estate taxes on your primary residence, but on any other properties you own.
- Tax-free profit when you sell is a major tax benefit. A single taxpayer can net up to $250,000 ($500,000 for a married couple) and not owe any capital gains on that amount.
And your tax-break-filled home doesn't have to be the traditional single family house. The IRS considers condos, co-ops, RVs and even boats as homes. As long as where you hang your hat has cooking, sleeping and bathroom facilities, it is a home for tax purposes.
Remember, though, that some home-related expenditures, such as hazard insurance and general home maintenance, are yours alone.
Some home improvements, though, might count either as medical deductions or can be used to increase your home's basis in order to help you shelter more of your sales profit from taxation.
Yep, the Internal Revenue Code sure supports the American homeownership dream. But these tax breaks mean that the Treasury misses out on a lot of money.
In these penny-pinching times, it's possible that Capitol Hill will reduce some of the homeownership tax benefits, if not before the 2012 election, soon thereafter.
So if you have a home (or homes), be sure to claim these tax breaks while you can.
You also might find these items of interest: