How Does Owning a Home Impact My Taxes
- By Jim Blackburn
- on
- 100 first time home buyer FAQs
1. Mortgage Interest and Property Tax Deductions Can Lower Your Taxable Income
One of the biggest tax benefits of owning a home is the ability to deduct mortgage interest and property taxes from your taxable income.
Mortgage interest deduction: You can deduct the interest you pay on your mortgage loan, which can add up to significant savings, especially in the early years of your mortgage when a larger portion of your payment goes toward interest.
Property tax deduction: You can also deduct the amount you pay in property taxes on your home. This reduces your taxable income, potentially lowering your overall tax liability.
These deductions can make homeownership more affordable and help you save money each year.
2. Capital Gains Exclusion When Selling Your Home
When you sell your home, you may be eligible for a capital gains exclusion, meaning you won’t have to pay taxes on the profit from the sale of your home up to a certain amount.
If you meet certain conditions, you can exclude:
$500,000 of profit if you’re married and filing jointly
$250,000 of profit if you’re a single filer
To qualify for this exclusion, you must have lived in the home for at least two of the five years before selling it. This can be a huge tax break, especially if your home has appreciated in value over time.
3. Deductions for Energy-Efficient Improvements and Home-Related Expenses
Homeowners may also be eligible for tax credits and deductions for energy-efficient improvements made to their home.
Common energy-efficient improvements include:
- Solar panels
- Energy-efficient windows and doors
- Insulation upgrades
These improvements not only help reduce your energy bills but can also qualify you for tax credits that can reduce your tax liability. Additionally, certain home-related expenses, such as mortgage insurance premiums or points paid to secure your loan, may be deductible, providing you with even more savings.
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At Stairway Mortgage, we’re here to help you navigate the home-buying process—
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