Top Ten Real Estate Tax Breaks
By Ben Hirsch
Here's a look at the Top 10 Tax Breaks for the homeowner/investor.
1. Mortgage Loan Interest: Deductions reduce your taxable income
against which your taxes due are calculated.
2. Home Improvement Loan Interest: You can deduct all the interest
on a home improvement loan provided the work is a "capital improvement" rather than
repairs, maintenance or cosmetic upgrades. Capital improvements typically increase
your home's value.
3. Points: You can fully deduct points associated with a home purchase
mortgage, but not a mortgage broker's commission.
4. Property Taxes: Property taxes or real estate taxes are fully
deductible. Any local city or state property tax refunds reduces your federal property
tax deduction by the same amount.
5. Capital Gains Exclusion: Allows married taxpayers who file jointly
to keep, tax free, up to $500,000 in profit on the sale of a home used as a principal
residence for two of the prior five years. The amount is halved for those filing
single or separately
6. Home-Based Business Deduction: Home offices that use a portion
of your home exclusively for business could qualify you to deduct a percentage of
costs related to that portion. Included are a percentage of your insurance and repair
costs, utility bills and depreciation.
7. Selling Costs and Capital Improvements: When you sell your home,
you can reduce your taxable capital gain by the amount of your selling costs, which
include real estate commissions, title insurance, legal fees, advertising and inspection
fees. Costs typically stemming from decorating or repairs -- painting, planting
flowers, maintenance -- are also selling costs if you complete them within 90 days
of your sale and with the intention of making the home more saleable.
8. Moving Costs: To qualify, you must meet certain requirements
including, moving within one year of starting your new job, moving 50 miles farther
from your old home than your old job was and working full-time at the new job for
39 of 52 weeks following the move. Deductions include travel or transportation costs
and expenses for lodging and storing your household goods.
9. Mortgage Tax Credit: Mortgage Credit Certificates (MCCs) allow
qualifying low-income, first-time home buyers to take a mortgage interest tax credit
of up to 20 percent (the amount varies by jurisdiction) of the mortgage interest
payments made on a home.
10. Energy Tax Credits: The newest home-based tax credits were
made possible last year by the Energy Policy Act of 2005. Tax credits of up to $500
in 2006 and 2007 are available for upgrading heating and air conditioning systems,
insulations, windows, doors and thermostats, caulking leaks, installing pigmented
metal roofs and for otherwise reducing energy waste in your home.
Ben Hirsh is an active Realtor and an expert on Atlanta Real Estate He can be reached