In today’s Tax Tips, Tax Advanced Team Member Christina Manis and Tax Principal Kevin Hickman answer the question, “What are the benefits of home ownership?” Click here for video.
Home ownership can provide several different types of tax benefits.
Two of the most common benefits are the mortgage interest and property tax deductions. These are itemized deductions and are included on Schedule A on your Form 1040. One limitation though is that mortgage interest is only deductible on debt up to $1.1 million.
Also, depending on your level of income, you may be able to deduct mortgage insurance premiums related to your load.
Property taxes are deductible in the year paid regardless of the year for which the taxes related. So, you could deduct two years worth of property taxes if they are both paid within the same calendar year.
Another benefit of owning your home relates to the sale of that home. If you use the home as your principal residence for two out of the last five years, you may exclude the gain for the sale of your residence. The exclusion gain is up to $250,000 for single taxpayers and $500,000 for marrieds filing joint.
If you have a second home and have a gain on the sale of that home, you should be aware that gain will be taxable.