Being Familiar With Tax Benefits of Property Ownership

Owning our own home mostly give us the benefit of pride. We mostly find ourselves accomplished once most of our friends and family acknowledged our full independence by having our own home. Having your own home means you can decorate all year round and no one will even say you are doing it wrong. You can watch TV all day long and would just feel comfortable lying there as it is your own home. And with all the great side of having your own home, the tax benefits of property ownership are just a lot.



When you purchase you home, the IRS guarantees that you can deduct the interest rate in the year that it is paid. In most cases, loan discount points together with its origination fees are tax deductible, whoever paid for it. However, you should look at lines 801 and 802 of your settlement statement if you get an unusual deduction especially if the seller paid your closing costs. Keep in mind that origination fees even if it is just 1% is common, if you have this you can still get a lot of cash.



Do you know that you can have a home mortgage interest deduction? This means that you can take an itemized deduction on interest paid on a mortgage of up to a million dollars for a principal residence and even on your second home.



You can also take advantage of your mortgage interest. You can do this by deducting the interest charge on your loan or you can also improve your principal residence in the year that it is paid. If you belong to the 28% federal tax bracket, you can get advantage of lowering your borrowing costs by almost a third.



Another benefit that you can get with property ownership is by getting a "Home Equity Loan". This will let you get deduction on an additional $100,000 mortgage debt. For instance, when you used your credit card to help in paying your monthly fee for $10,000 and you use your home equity loan, all of the interest would be deductible unlike if you live in an apartment and have the same scenario, none of it would be deductible. The rate of obtaining a home equity loan is just prime plus one or two and they are basically lower that credit card rates, which is much better for homeowners.



You can also have a property tax deduction. This means that you can deduct from your federal income taxes and even your local property taxes the tax that you will pay for your home. And if you are going to sell your house and have lived there for two of the five years prior to its sale, you do not have to worry on paying your income tax for it since you are OK. You can earn up to $500,000 on the sale of the house and you do not have to worry about paying your federal income tax that is if you are married. If you are single, you can get $250,000 tax free, which is also not that bad.



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