Adapted from Stephan Fishman’s article “The Tax Benefits of Homeownership” for Inman News, LendingTree’s “Tax Benefits of Owning a Home” and Quicken Loans’ “Top Ten Tax Deductions for Homeowners” by Clayton Closson.
To rent or buy? The age old question on many new home hunters’ minds can often be influenced by two simple words: TAX DEDUCTIONS.
When taking the first leap into homeownership many new buyers find themselves unsure of the commitment. Runny faucets, leaky roofs and everyday upkeep overwhelm these former renters. But there are unseen benefits to homeownership. Not only is there stability, increased borrowing power, appreciation, and equity– there are great tax benefits to owning your own home.
Consider the following tax deductions:
- Home equity loan deduction- itemized deduction on the interest paid on a mortgage or mortgages of up to $1 million for a principal residence and second home
- Home equity loan deduction- those who borrow up to $100,000 against the equity in their home can deduct the interest as an itemized deduction
- Property tax deduction- state and local property taxes can be itemized and deducted from their federal income tax filings
- Deductible “home-buying” expenses- closing costs and points paid on purchasing and refinanced loans, prorated interested on new loans and prorated property taxes paid at settlement can also be itemized and deducted
- $250,000/$500,000 home-sale exclusion- those who lived in their home for at least two of the prior five years prior to its sale pay no income tax on their profit up to $250,000 for single homeowners and $500,000 for married homeowners who file jointly
- 14 days of free rental income- any profit made on renting the property for up to 14 days does not have to be claimed
- Moving expenses- write off the cost of moving household items, vehicles, and other various but reasonable costs accrued during the move, stipulation, the new job must be 50 or more miles further from the old home than the old job was
- Home Offices- deduct maintenance costs associated with the portion of your home exclusively used for business including a portion of the utlities and the cost of trash pick up
- Home Improvements- home improvements made for medical purposes, for a chronically ill or disabled person, can be deducted if the improvements do not add to the overall value of the home
- Vacation Homes- deduct costs related with owning a vacation home like: real estate taxes, personal property taxes and mortgage interest
So what kind of deductions do renters receive? Not many. Typically the only deduction a renter can file is cost associated with running a home office.
Still not sure about renting or buying? Checkout our sources….
http://www.lendingtree.com/smartborrower/buying-a-home/getting-ready/tax-benefits-of-owning-a-home/
https://www.quickenloans.com/mortgage-news/top-ten-tax-deductions-for-homeowners-5311