How to use your home to save on your taxes - Jon Andrews, CPA, P.C.
helps you lessen your tax burden
Many people find that their residence is one of the best and most
secure methods they have of reducing their tax bill. Generally, the
interest paid on the house is deductible (see full discussion below) and
some or all of the profit on resale may be completely tax-free.
Mortgage interest - Interest on up to $1,000,000 of debt incurred to buy or
build your principal and/or second residence is fully deductible. If you file
using the "married filing separate" status, the limit is $500,000. To qualify,
the debt must be secured by the home and the taxpayer claiming the deduction
must owe the debt and make the payments. Click to apply for a mortgage with Ameriquest Mortgage
.
Points - Points paid when you purchase your home are, generally, fully
deductible in the year paid. If you refinance and pay points, those points are,
generally, amortized over the life of the loan.
Home equity interest - If you have a home equity loan of $100,000 or less
($50,000 if you are married filing separate), you can deduct that interest
regardless of how you use the proceeds. Boats and RV's that meet certain
requirements can be considered as second residences for this purpose. You should
consider using a home equity loan to pay for purchases that would otherwise not
generate tax deductible interest. Examples of these types of expenditures would
be personal vehicles, credit card balances, and personal goods such as
furniture. Exercise caution - your house will be at risk if you cannot repay the
loan. To fill out a 30 second home equity loan application with
Quicken Loans click here.
Sale of your home - If you meet the requirements, up to $250,000 ($500,000 if
you are married filing jointly) of the gain on the sale of your principal
residence can be completely tax free. This rule replaces the old "reinvest in a
new house" rule. To qualify, you must have lived in the house as your primary
residence for at least 2 of the preceding 5 years. There are some exceptions to
the 2 out of 5 rule. If you are planning to sell your house but do not meet the
2 out of 5 requirement, contact us for assistance in determining whether you
qualify for any of the exceptions. To get an instant appraisal of your home,
click On-Line Appraiser!
Keep in mind that the ideas presented are, by necessity, of a general nature.
We would be happy to discuss how these, or other ideas, apply to your specific
situation. Click here to send us an
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