Homeowners Enjoy Tax Breaks

April 25, 2008 at 4:36 pm 1 comment

 

 

 

Homeownership has man obvious advantages – privacy, security and a sense of community. But owning a home also offers a major financial advantage in the form of tax benefits.

The professionals at Coldwell Banker Real Estate Corporation list six major financial benefits of homeownership. Of course, you should always rely on a tax professional for advice.

Tax advantage No. 1. Most homeowners can deduct property taxes and interest paid on their mortgage every year of ownership.

Tax advantage No. 2. Homeowners can borrow against the equity they build. That hasn’t always been the case in Texas, but now the equity in a home can be used for home improvement, to pay for education or for other needs. Homeowners may be able to deduct the interest from federal taxes. Renters have never had such an opportunity.

Tax advantage No. 3. Single taxpayers who qualify own no tax on the first $250,000 of gain when they sell their principal residence. The amount is $500,000 for married couples who jointly file their tax return.

Tax advantage No. 4. Interest paid on a second mortgage also may be deductible if the total of the first and second mortgages is no greater than $1 million.

Tax advantage No. 5. Certain moving expenses may be deductible if the move is job related, and the relocation is 50 miles or more from the previous residence.

Tax advantage No. 6. Depending on where you live, certain real estate tax exemptions apply to those who meet specific criteria. In Texas, for example, homeowners may apply for a homestead exemption on their principal residence. Homestead exemptions must be filed before April 30. Texans may receive several types of exemptions, including school taxes, county taxes, age 65 or older and disabled.

An exemption excludes all or part of a property’s value from taxation. It provides significant relief for some taxpayers by reducing taxable value and tax levies. Most property receives no exemptions and is totally taxable.

Generally, you have to apply for the exemption to receive it. If you fail to file a required application on time, you forfeit the right to the exemption. The requirements for exemptions are extensive and detailed.

Except for federally mandated property tax exclusions, all legally enforceable Texas exemptions must arise from the Texas Constitution. The exemptions authorized by the Texas Property Tax Code are numerous. Many exemptions concentrate on narrowly defined groups of properties for specific categories of owners. For example, the cemetery exemption only applies to not-for-profit cemeteries.

For more information on exemptions, including a list of those available in Texas, send $5 to the Real Estate Center at Texas A&M University, 2115 TAMU, College Station, Texas 77843-2115. Ask for The Texas Property Tax System by Dr. Charles E. Gilliland. This 54-page book also can be ordered by telephone using a credit card. Call 979-845-2031.

As far as your income taxes are concerned, is one time of year better than another to buy a home? Generally, experts say the earlier you buy, the better. If you buy during the first 6 months of the year, you have more months of deductible mortgage interest.

Contributed by David S. Jones, reprinted with permission from the Real Estate Center at Texas A&M University.

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1 Comment Add your own

  • 1. riathareja  |  April 28, 2008 at 10:52 am

    If you’re thinking about buying your first home, you have more incentives for purchasing one other than the good deal you can land in today’s housing market. Home ownership comes with some pretty nifty tax breaks, besides the pride of owning your own place and building equity (instead of throwing away your cash on rent).So, as you patiently wait in line at the post office today to send off your income tax returns to Uncle Sam (hopefully, you’re not there until midnight!), look on the bright side and consider the tax perks of owning a home — instead of feeling squeamish about buying one.All the interest you pay on your monthly mortgage is deductible, unless your loan is more than $1 million. Interest tax breaks also apply to the extra cash you pull out from refinancing, or if you decide to get a home equity loan or line of credit later on.A big part of most monthly loan payments is taxes, which go into an escrow account for payment once a year. This amount should be included on the annual statement you get from your lender, along with your loan interest information. These taxes will be an annual deduction for as long as you own your home.Mortgage interest, points and property tax deductions are itemized deductions you indicate on Schedule A of IRS Form 1040. Get the entire scoop on Tax Information for First-Time Homeowners from Publication 530 from the IRS.For more view- realtydigest.blogspot.com

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