Tax Advantages of Home Ownership

In addition to ‘writing off’ some home expenses such as mortgage interest and property taxes there are a couple lesser known potential tax benefits of home ownership.

The federal government recently passed H.R. 3221, The Housing and Economic Recovery Act of 2008. There are a number of aspects to this bill, but the one that may have the biggest impact on first time home buyers is the $7,500 tax credit. Here are some highlights:

- Any U.S. citizen who hasn’t owned a home in the past 3 years may be eligible.
- The home must be purchased between 4/9/2008 and 7/1/2009.
- The $7,500 credit may be received on federal income tax returns filed in 2008 or 2009.
- The income limits for home buyers are $95,000 for single filers and $170,000 for married filers. The credit starts phasing out at $75,000 and $150,000 respectively.
- This credit is actually an interest free loan from the government and must be repaid at $500 per year over a 15 year period. If the home is sold before the credit is paid off, the remaining balance will be recovered from the profit. If there isn’t enough profit to cover the balance, the rest of the loan will be forgiven.

This program isn’t for everyone, but it is a good source for interest-free money for those who qualify.

Another tax-related benefit of home ownership is the tax-free profit from home sales. If you have owned and lived in a home for at least 2 of the 5 years prior to the sale, you may be eligible to receive the profit tax-free up to the following limits:

- $250,000 for single filers
- $500,000 for married filers

Many homeowners aren’t aware of this change in tax law. The previous rule was that a seller had to buy a more expensive house in order to avoid immediate tax liability and there was a one time tax exclusion of up to $125,000 for persons 55 years of age or older. The new rules have greatly simplified and improved the potential financial benefit of selling your home!

Don’t hesitate to give me a call with any questions and be sure to talk with your tax advisor to see how these benefits apply to your situation.

Possibly related posts:

1. Economic Recovery Package/Stimulus Plan affects Lakeville Home Buyers and Owners!
2. 2010 Home Buyer Tax Credit
3. August 2008 Lakeville Home Update!
4. Home Staging Works!
5. Lakeville Area Real Estate in 2009

Related posts brought to you by Yet Another Related Posts Plugin.