Tax benefits for the new homeowner may be up to forty percent of the total cost of home-related expenses. When a person considers buying or selling a property, they must consider the possibility that there are some tax benefits that can make owning a home very profitable. This article looks at some of the most common tax relief advantages of buying a house.
Depreciation
The first and most unique tax benefit for buying a house is that you get depreciation on the home itself. This is the amount of time the home can be depreciated before it needs to be sold. The longer you own the home, the more it will depreciate, so be sure to purchase a house that will be affordable for your family when you sell it. Many families buy a house after retirement or in order to start their own business.
Deduction
Once you have purchased your new home and are planning to move, you can deduct the costs associated with relocating. It may seem like a small advantage, but if you were to move within the first year of owning the home, you can get a lot of benefit from this deduction. If you want to use the money to buy your next house, you can do so. However, it will not be as advantageous if you are planning to sell the home shortly after you relocate. You can also take advantage of this tax benefit when you sell your previous home.
Mortgage InterestÂ
Another tax benefit for purchasing a new house is that you get to deduct the cost of mortgage interest on your tax return. Mortgage interest can be deducted as long as it has been paid on the loan for six months or more. Be sure to pay your payments on time and avoid late fees, but the amount is important. There is no limit on how much mortgage interest can be deducted. This is very good for anyone who is looking to get a break on paying back their mortgage.
Home Improvement
Another tax benefit that is available for homeowners is the deduction of interest on home improvement. This applies to repairs to the house, as well as additions and improvements. The amount of these deductions that you can claim depends on your situation.
A home improvement tax benefit is that the seller can exclude the cost of certain items that are part of new home improvement. This means you will be able to deduct all or a portion of a painting job if you are using a contractor. Many people like to paint the walls of their home to give it a newer appearance. This can reduce your tax liability.
Home Value
Another tax benefit that can be taken advantage of if you are selling your house is the exclusion of interest from the total amount that the house is worth. This is the total home’s value minus any mortgage payment that is outstanding at the end of the year. Be sure to compare mortgage payment exclusions on different types of mortgages to determine which ones will save you the most money. For example, you might be able to exclude only half of your mortgage payment when using an ARM.
Be sure to discuss these options with a tax professional before you purchase a house. He can tell you what types of improvements are best to add or subtract to your home in order to maximize the amount you can deduct. as well as how you can take advantage of it.
