Tax Benefits of Owning a Home
A home owner should take solace in the U.S. tax code, which makes buying a home a good deal for almost everyone.
Here’s why:
Mortgage interest deductions, including in some cases mortgage insurance premiums, reduce homeowners’ tax liability by reducing income. The deduction includes interest paid on both a first and a second home.
Interest on home equity loans is also deductible — whether the borrower uses the money to remodel the kitchen or to take a vacation to Disney World.
Profits from selling a house are potentially a huge windfall. When a homeowner sells a primary residence, any profit on the sale of the property is tax free up to $250,000 for single homeowners and $500,000 for married homeowners filing. Any profit above that is nearly always a long-term capital gain taxed at 15 percent — less if the seller’s tax rate is less than 20 percent.
Homeowners can itemize. That opens up opportunities to deduct a host of other items that wouldn’t be deductible if the taxpayer took the standard deduction