Personal Residence tax advantages
Owning a personal residence allows individuals to really take advantage of itemized deductions. For your personal residence you are allowed to deduct the property taxes paid during the year and qualified mortgage interest paid.
Qualified interest is interest paid on a personal home mortgage. Generally, the mortgage is limited to $500,000 if it is used to acquire or improve one’s home. Home Equity interest is deductible if the debt is $100,000 or less ($50,000 if single).
A personal residence is not limited to just your primary residence, it can include a second home even if the second home is not used during the year. If the second home is rented out for a portion of the year then you must stay in the home greater than 14 days and a minimum of 10 percent of the amount of time rented.
Any points paid on a qualified mortgage are deductible as well.
For some mortgage insurance (PMI) maybe deductible as well. Some borrowers may be required to purchase private mortgage insurance or be required mortgage insurance under VA or FHA programs. These payments are deductible. This is not property protection insurance which is not deductible.
When you go to sell your personal residence, you may be eligible to exclude up to $500,000 ($250,000 if single) of any gain on the home. It is necessary to keep good records to document any improvements that add to the original purchase price. To qualify one must have owned the home at least 2 years and lived in it at least two years in the last five years.
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