Owning a home can come with several tax advantages that can help reduce your federal tax burden. Here are some of the key benefits:
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Mortgage Interest Deduction: This is a big one. You can deduct the interest you pay on your mortgage up to a certain limit. Currently, the limit is $750,000 of mortgage debt for married couples filing jointly and $375,000 for single filers or married filing separately. There are some rules around what kind of mortgage qualifies for this deduction, so be sure to consult with a tax advisor for specifics.
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Property Tax Deduction: You can also deduct the property taxes you pay to your local and state governments. There is a limit on this deduction as well, currently set at $10,000 for married couples filing jointly and $5,000 for single filers or married filing separately.
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Capital Gains Exclusion: When you sell your home, you may be able to exclude a portion of the profit from capital gains taxes. If you are single, you can exclude up to $250,000 of gain, and if you are married filing jointly, you can exclude up to $500,000. To qualify for this exclusion, you must have owned and lived in the home for at least two of the past five years.
Important Notes:
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These are just some of the potential tax benefits of homeownership. It’s important to remember that tax laws can change, and your situation will determine how much you benefit.
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To claim most of these benefits, you will need to itemize your deductions on your tax return. This means your total itemized deductions must exceed the standard deduction amount set by the IRS.
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Consulting with a tax professional is always recommended to ensure you are taking advantage of all the tax benefits available to you as a homeowner.
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