“Tax Advantage” is not necessarily
If you have recently bought or sold a home, there are a few tax advantages that may be available to you. Generally speaking, real estate broker’s commissions, title insurance, legal fees, advertising costs, administrative costs and inspection fees are considered selling costs and may reduce taxable capital gain by the amount of the selling costs.
However, every year the tax code can change and your situation may be unique. So the following is provided only as a guide. It is highly recommended that you seek a professional tax consultant to be sure.
There are several other key areas where you might benefit:
Mortgage Interest: Within limits, it may be tax-deductible. For example, a married couple filing jointly can deduct interest payments on a maximum of $1 million in mortgage debt secured by a first or second home. Buyers may also be able to deduct some of the interest they paid on a home equity loan or similar line of credit.
Points: Points or origination fees on a home loan paid during purchase are generally tax-deductible in full, for the year in which they were paid.
Refinanced mortgage points: These may also be deductible, but only over the life of the loan. Homeowners who refinance can immediately write off the balance of the old points and begin to amortize the new.
Improvements: Improvements made to property prior to the sale (or once one moves in) might qualify for an interest deduction on your home-improvement loan. Qualifying capital improvements are those that increase your home’s value, prolong its life, or adapt it to new uses, such as adding a porch or installing energy-efficient windows.
Real Estate Taxes: During a sale, the seller will send the local tax collector’s office a check for real estate taxes prior to the closing. In many circumstances, however, the buyer will pay a pro-rated portion of the taxes for the year at closing. This tax deduction also gets overlooked.
Business Use: For new buyers who work at home: If a room is used exclusively for business purposes, they may be able to deduct home costs related to that portion, such as a percentage of your insurance and repair costs, and depreciation.
Moving Costs: If you have moved because of a new job, moving costs might be deducted. These can include travel or transportation costs, lodging, and fees for storage of your household goods.
In today’s economy, it’s critical that we take advantage of every possible tax break.
A home provides a great opportunity to do just that.
It is my hope that you find the above information useful. You should consult with an attorney as well as tax experts for sound advice, and you should consult with ME when you buy or sell your next home!