If you’ve just bought your first home this year, you’ll find there are some very valuable monetary perks related to your income taxes come January.
As you likely know by now, mortgage payments on a new home are largely interest. But that mortgage interest is tax deductible, whether you own a single-family home, mobile home, townhome, condo or cooperative apartment. The deduction applies even if you own more than one home, as long as you stay at your second home at least 14 days a year.
If you paid points on the loan for your main home, you can deduct them in the year you paid them, according to financial publisher Bankrate. Points paid on a loan you obtained for a second home or vacation home must be amortized over the life of the loan.
In addition to mortgage deduction, as a homeowner, you are also entitled to a property tax deduction, which is itemized on Schedule A of your income taxes. A large portion of most mortgage payments goes to property taxes, which are placed into escrow to be paid once a year, says Bankrate. You’ll receive a yearly statement showing the interest you paid in the last year, which is deductible.
There are even more deductions if this is the first year you’re paying property taxes on your new home. When your home was transferred to you at closing you paid taxes for the part of the year you owned the home. You can deduct those, too.
Sellers have some income tax advantages, as well. If your house sells for up to $250,000, or $500,000 for married, filing jointly, you pay no taxes on the profit as long as you owned it for two years and lived in it for at least two of the five years before you sold it. Exceptions include a health- or employment-related sale or other issues, when the gain is prorated, adds Bankrate.
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