Tax deductions on your mortgage
Homeowners are allowed to deduct their mortgage interest at tax time, which is a huge break since the interest can be a big part of your monthly payment. Your property tax is also deductible on your primary residence, as well as a vacation home. If the seller paid any taxes that you reimbursed them for, you can write that off at tax time!
Tax deductions on your home equity loans
Like mortgage interest, you can also deduct the interest you paid on your home equity loan or line of credit — on up to $100,000 borrowed. Credit card debts can also be tacked onto your hoe loan for a much lower interest rate!
Tax deductions for home improvements
Up to $100,000 of the interest incurred on home improvement loans is tax-deductible. And energy-efficient improvements, like weatherproofing windows or installing energy-efficient toilets, can also give you a tax credit of up to $500. Cosmetic improvements, like repainting or wallpapering, are not tax-deductible.
Tax deductions on points
Points are a fee that your lender charges you, with one point equaling one percent of the loan principal. You’re allowed to deduct points attached to your home purchase mortgage. Most homeowners have one to three points on their loan principal.
Exclusion from capital gains
If your home has been your primary residence for two years or more, you qualify for exclusion from paying capital gains at tax time. Married homeowners who file jointly can keep, tax free, up to $500,000 in profit on the sale of a home.
Your home builds equity
Equity is the appraised value of your home minus what you still owe on it. Every month that you make a mortgage payment increases your equity, which turns your pretty house into a pretty darn good investment. The #1 reason people tap into their home equity is for home improvements.
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