Homeowners in the U.S. have something to rejoice now. The reason is that they can take advantage of tax breaks to lessen their expenses. And this is not limited to certain types of homes as it applies any type.
Be aware, however, that in order to fully benefit from these tax breaks can mean more complex taxes. But this should not be a problem if you wish to reduce your homeowner expenses.
If you want to go with the traditional way of claiming your standard deduction, you can still do so. But if you want to consider other options, you can deduct homeowner expenses on Schedule A.
Did you know that your mortgage interest is deductible? The exception is if your loan is more than $1 million because if this is so, your deductible interest will be limited. In addition, know that this tax break is not even limited to your first home mortgage because regardless if you apply for a home equity loan, line of credit or home refinancing, you can still enjoy tax breaks.
Another good news, particularly for those who own more than one property, is your mortgage interest can still be fully deductible. This applies not only to second homes but even to other additional properties so long as they are equipped with facilities for cooking and sleeping. It’s important to take note, however, is that there’s a condition you need to adhere to. For your second property, you need to stay there for at least two weeks otherwise, your interest deduction could be stopped.
The points you pay to enable you to avail of better rates for home loans also offer tax breaks. If, for instance, the purpose of your loan is to buy or build a new home, your payment points can be deductible. Just ensure that your loan is able to fulfill the qualification requirements.
In case you’re refinancing a loan, your points can be deducted normally throughout the duration of the loan. You can choose to have it deducted monthly.
With the home equity loan, the points can be deducted within the year the loan was released. Keep in mind, however, that the amount should be used for the house alone because using it for other purposes may be subject to other terms and conditions.
Another instance when you can enjoy tax breaks is when selling your home. Homeowners can actually stay away from taxes on the profit they gain from selling their residential property. A profit of up to $250,000 is now free from tax on condition that the house was owned for two years and the owner lived in it for at least two years before selling it. Note that the tax relief in selling a home can only be availed of on certain situations such as due to the owner’s health, unemployment and other unforeseen circumstances to include death, divorce, loss of job and multiple births.
Sales of second homes can provide tax breaks as well but only to a limited amount. Tax relief can be gained on part of the proceeds of the sale and it will be based on the length of time the house was used as a second residence of the homeowner.