Your biggest tax benefit is the ability to deduct the mortgage interest you pay up to $1 million on your principal residence or a second home. You may also deduct the interest paid on a home equity loan or second mortgage up to $100,000.
All points paid to the lender are tax deductible in the year you buy your home. If you refinance your home, the points are still deductible -- over the life of the loan. If you refinance or sell your home, you may take any remaining points paid in the year of the refinance or sale.
Local property taxes paid are also deductible for any home you own. On the flip side, if your city decides to issue a property tax refund, you'll be required to pay a tax on the amount refunded.
The big tax break: If sell your home and earn a profit of up to $250,000 (if you're single) or up to $500,000 (if you're married), you will owe no tax on your capital gain. You must, however, live in your home for at least two of the past five years.
If you sell after 22 months, and you do not move because of your job (you must move 50 miles or more) or because of medical reasons, you'll owe tax at your long-term capital gain rate, either 20 percent (if you're in the 28 percent bracket or above) or 10 percent (if you're in the 15 percent bracket or below). If you sell within a year for a profit, you'll owe taxes based on your marginal tax rate.
A move to a new home for a full-time job (at least 39 hours per week), grants you a tax break on moving expenses. You may deduct travel and transportation costs, lodging en route, as well as the cost of temporarily storing furniture. Mileage criteria change year to year. For the current mileage rates go to The IRS Website. |
