Your Home as a Tax Shelter: Top Ten Tax Deductions for Owning Your Home
Not just a shelter from the elements, your home also serves as a valuable tax shelter.
Your home provides many tax benefits -- from the time you buy it right on through when you decide to sell. Here's a summary of the tax benefits of home ownership; for details, visit the IRS website at www.irs.gov.
1. Mortgage Interest
If you're filing jointly, you can deduct all your interest payments on a maximum of $1 million in mortgage debt secured by a first and second home. The maximums are halved for married taxpayers filing separately.
You can't use the $1 million deduction if you pay cash for your home and later use it as collateral for an equity loan.
Learn more from IRS Publication 936, Home Mortgage Interest Deduction, available at www.irs.gov.
2. Points
Your mortgage lender will charge you a variety of fees, one of which is called "points." A point is calculated at 1% of the loan principal. One to three points are common on home loans, which can easily add up to thousands of dollars. You can fully deduct points associated with a home purchase mortgage. You cannot deduct a mortgage broker's commission.
Refinanced mortgage points are also deductible, provided they are amortized over the life of the loan. Homeowners who refinance can immediately write off the balance of the old points and begin to amortize the new.
3. Equity Loan Interest
You may be able to deduct some of the interest you pay on a home equity loan or line of credit. However, the IRS places a limit on the amount of debt you can treat as "home equity" for this deduction. Your total is limited to the smaller of:
- $100,000 (or $50,000 for each member of a married couple if they file separately), or
- the total of your home's fair market value -- that is, what you would get for your house on the open market -- less certain other outstanding debts against it.
Thanks to the Tampa Tribune for this article
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