Owning a home provides more than just a place to live—it can also offer significant financial and tax benefits. While the emotional satisfaction of homeownership is undeniable, understanding the tax implications can maximize its advantages.
Income Tax Benefits
Homeowners enjoy tax deductions for mortgage interest and property taxes, along with preferential treatment of gains when selling a home. However, since the passage of the Tax Cuts and Jobs Act (TCJA), some limitations apply. For example, taxpayers can deduct up to $10,000 combined for property taxes and state/local income or sales taxes annually. Additionally, interest on home equity loans is only deductible if used to improve the home.
Benefits from Deductions
Depending on your mortgage interest and property tax payments, you might find it more beneficial to itemize deductions rather than claim the standard deduction. For 2024, the standard deduction is $14,600 for single filers and $29,200 for joint filers. Be sure to pay property taxes by December 31 to claim the deduction for that year.
Benefits on the Sale of Your Home
The law allows homeowners to exclude up to $500,000 (married couples filing jointly) or $250,000 (single filers) in gains from selling their primary residence. This exclusion applies if you’ve lived in the home for at least two of the last five years. Special rules may apply for circumstances like job changes or health issues.
Key Takeaways
The tax benefits of homeownership can be significant if you know how to leverage them. Keep records of your purchase price, improvements, and payment dates. If you’re planning a home sale or have special circumstances, consult a tax advisor for personalized guidance.
Have questions about homeownership and taxes? Contact Verity CPAs at info@verity.cpa or 808.546.5026 to get expert advice tailored to your situation.
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