What Are The Tax Benefits of Owning a Charlottesville Home?
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There are many reasons for wanting to own your Charlottesville home instead of continuing to pay rent. Among the main reasons to purchase a home are to have a place to raise your family, your own space to share with friends, and providing a home where you and your family feel safe and secure. Also there is the feeling that home ownership is a sound investment opportunity due to the fact that homeowners’ net worth is over forty times higher than that of renters, and it is important to consider the tax benefits that reduce tax liability.
- Taxpayers who have owned and used a home for at least two out of the last five years, can exclude a maximum of $250,000 of gain as a single taxpayer and up to $500,000 of gain for married taxpayers filing jointly.
- If the gain on a principal residence exceeds the allowed exclusion, the balance is taxed at the lower long-term capital gains rate rather than the marginal tax rate of the homeowner.
- Homeowners can deduct the interest paid on up to $1,000,000 of acquisition debt used to buy, build or improve their first or second home. They may also deduct the interest on up to $100,000 over acquisition debt that is a recorded lien on their first or second home.
- IRS will allow taxpayers to decide each year whether to take the higher of the itemized deductions or the standard deduction.
- Points paid on new loans for home purchases are considered interest and can be deducted in the year paid. On the other hand, points paid for refinancing a home must be amortized over the life of the mortgage.
For more information, talk to your tax professional and see IRS publication 523 and IRS Publication 936.
When you are deciding whether your family should purchase a Charlottesville home or continue to rent, don’t forget to factor in the tax benefits of homeownership.
Pam Dent