Tax Benefits of Owning a Home

We all can agree that owning a home can be an investment. Gone are the days when you could call your landlord when the air conditioner went out or the water heater was on the fritz. As a home owner those responsibilities now fall on you and while they can be expensive repairs, the benefits of owning a home are far greater. One particular advantage that lures many people into home ownership is the tax benefits that they can receive. Here are few ways that owning a home can really pay off come tax time.

Mortgage Interest

If you are the in the majority of Americans who have financed their home with a mortgage loan then there are two parts to your mortgage payment; the principal and the interest. As an incentive for home ownership the federal government provides a tax benefit for the interest portion of the loan. For the sake of numbers lets say that your salary was $85,000 and your mortgage payment was $1,200 month. Lets say the interest on this loan was $800 month. At the end of the year the home owner will have a $9,600 tax write off. This simply means that their taxable income drops from $85,000 to $75,400.

Capital Gains

If you are a home owner and you sell your home you are able to receive a tax break. Lets say that you purchased your home for $300,000 and you sell it for $400,000, you now have a $100,000 profit, or gain-which is income. If you make income through a job, contract work, or the sale of stocks and mutual funds you have to pay tax on that but with home ownership it is different. If you are single and have lived in the home for more than two years you do not have to pay tax on that gain. In fact you do not have to pay tax on any gain up to $250,000. If you are married and file your taxes jointly then you do not have to pay tax on any gain up to $500,000. Home ownership is looking pretty nice now isn’t it!?

Tax Credits for Moving

There are usually tax breaks when moving between states. It is always best to check with a CPA, certified public accountant, in the state you are moving out of and the state you are moving to. The reason for this is because there might be benefits realized in one state but not another. If you are relocating out of state for job purposes that is another reason to look into this as there are typically tax breaks for that reason.

When weighing your options on purchasing a home or renting be sure to factor in these great tax benefits. You will see that, while owning a home is an investment, it is an investment that has great benefits that can really add up in the long run. If you want more information on home ownership and the steps you should take leading up to obtaining a mortgage loan here are some tips and advice on where to begin. If you have any questions or want to learn more about First Ohio Home Finance we would love to hear from you. Contact us here!