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    7 Homeowner Tax Advantages

    Published: March 11, 2010 By: G. M. Filisko

     

    When you're evaluating how much home you can afford, make sure you factor in the tax advantages of homeownership.

    You can claim some tax deductions if you work from home, but be sure you're entitled to them before taking them.

    Owning your home not only allows you to build wealth through appreciation,  but it can also reduce the amount of income tax you pay every year.


    Here  are seven tax benefits for homeowners.

     

    1. Homebuyer tax credits

    If you purchase your first home before April 30, 2010, you’re entitled to a  tax credit of up to $8,000. If you currently own a home, but sell it to purchase  another home before April 30, 2010, you’re eligible for a federal tax credit of  up to $6,500.

    2. Deductions for loan fees

    Typically, you can deduct the “prepaid interest” you paid when you got your  mortgage loan. That includes points, loan origination fees, and loan discount  fees listed on your settlement statement, even if the seller paid those fees for  you. Each time you refinance your home, you can deduct prepaid interest  fees.
    However, you must meet certain requirements to take the prepaid  interest deductions when you purchase or refinance your home. Check with your  accountant to be sure you’re following the rules.

    3. Property tax deductions

    In the year you purchase your home, you’re entitled to deduct the real estate  taxes you paid at the closing table. You can continue to deduct the property  taxes you pay each year.

    4. The mortgage interest deduction

    Every year, you can deduct the amount of interest and late charges you pay on  your mortgage and home equity loans, though there are limitations. If you’re  required to purchase private mortgage insurance (PMI) because you made a  downpayment of less than 20% on your home, you can also deduct those premiums as  mortgage interest expenses.

    5. Home office expenses

    If you have a home office you use only for business, you may be eligible to  deduct the prorated costs of your mortgage, insurance, and other expenses  related to that space. The government scrutinizes home-office deductions  closely. Be sure you’re entitled to the deductions before claiming them.

    6. The costs of selling your home

    In the year you sell your home, you can deduct the costs of selling it,  including real estate commissions, title insurance, legal fees, advertising,  administrative costs, and inspection fees. You can also deduct decorating or  repair costs you incur in the 90 days before you sell your home.

    7. The gain on your home

    If you lived in your home for at least two of the previous five years before  you sell it, the government lets you to take up to $250,000 of profit on the  sale of your home tax free. That amount is doubled for married couples. This  deduction isn’t available on rental or second homes.
    The government also  allows you to subtract from your home sale profit any amounts you spend on  improvements, such as window replacement, siding, or a kitchen remodel. Those  deductions are in addition to the tax credits you can receive in 2010 for making  energy-saving upgrades. Money invested for routine maintenance and repairs  doesn’t count.

    This article includes general information about tax  laws and consequences, but is not intended to be relied upon as tax or legal  advice applicable to particular transactions or circumstances. Consult a tax  professional for such advice; tax laws vary by jurisdiction.

    Read more:  http://buyandsell.houselogic.com/articles/7-homeowner-tax-advantages/#ixzz2NGRQLHfb

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