Homeownership Tax Advantages
Posted 10-17-2009 at 07:26 AM by wiseman1
Buying a home is one of the smartest purchases you can ever make. One reason is that homeownership has many positive tax implications. The three most important sources of tax savings for home owners are the:
When the home is sold, the capital gain exclusion can again provide home owners a tax benefit. Under present law, sellers of a principal residence can exclude from taxation profits from the sale of a home, up to $500,000 for married taxpayers and $250,000 for single taxpayers. With capital gain tax rates expected to increase from 15 to 20 percent in coming years, these tax savings can be substantial.
Research by NAHB economists has estimated the tax savings for home owners for certain income and mortgage amounts. For a married couple with an income of $80,000 per year and an initial mortgage amount of $250,000, the tax savings from the mortgage interest and real estate tax deductions are estimated to save the couple more than $11,000 in the first five years of homeownership. Assuming the couple owns the home for twelve years, these savings grow to more than $25,000 over the time period. Combined with the capital gains exclusion, the total tax savings for the entire period of ownership exceeds $52,000.
For a couple with an income of $60,000 and an initial mortgage of $180,000, the five years tax savings total more than $6,000 and the total savings over a twelve year period are estimated to be more than $33,000.
Combined with the current $8,000 first-time home buyer tax credit (www.federalhousingtaxcredit.com), available for qualified purchases on or after Jan. 1, 2009, and before Dec. 1, 2009, the tax savings from homeownership make buying a home today a rewarding financial decision.
For more estimates of the tax savings of homeownership, check out NAHB’s “Opportunity Knocks” brochure.
Source: NAHB
- deductions for mortgage interest
- deductions for real estate taxes
- capital gain exclusion for the sale of a principal residence
When the home is sold, the capital gain exclusion can again provide home owners a tax benefit. Under present law, sellers of a principal residence can exclude from taxation profits from the sale of a home, up to $500,000 for married taxpayers and $250,000 for single taxpayers. With capital gain tax rates expected to increase from 15 to 20 percent in coming years, these tax savings can be substantial.
Research by NAHB economists has estimated the tax savings for home owners for certain income and mortgage amounts. For a married couple with an income of $80,000 per year and an initial mortgage amount of $250,000, the tax savings from the mortgage interest and real estate tax deductions are estimated to save the couple more than $11,000 in the first five years of homeownership. Assuming the couple owns the home for twelve years, these savings grow to more than $25,000 over the time period. Combined with the capital gains exclusion, the total tax savings for the entire period of ownership exceeds $52,000.
For a couple with an income of $60,000 and an initial mortgage of $180,000, the five years tax savings total more than $6,000 and the total savings over a twelve year period are estimated to be more than $33,000.
Combined with the current $8,000 first-time home buyer tax credit (www.federalhousingtaxcredit.com), available for qualified purchases on or after Jan. 1, 2009, and before Dec. 1, 2009, the tax savings from homeownership make buying a home today a rewarding financial decision.
For more estimates of the tax savings of homeownership, check out NAHB’s “Opportunity Knocks” brochure.
Source: NAHB