9400 Gladiolus Drive, Suite 290, Ft. Myers, Fl. 33908
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Homeownership offers lots of tax benefits WASHINGTON – Feb. 9, 2011 – Renting offers zero tax breaks, while buying a home has several tax benefits that make ownership more affordable. Real estate professionals, however, must be careful when providing detailed tax advice to clients to avoid lawsuits – but it’s okay to make sure clients have the information they need to understand all the tax benefits of homeownership. The following list outlines a few tax benefits of homeownership, according to Stephen Fishman, an author and lawyer who specializes in small business, tax and intellectual property law. ▪ Home mortgage interest deduction: Homeowners can take an itemized deduction on interest paid on a mortgage or mortgages of up to $1 million for a principal residence and/or second home. This deduction could potentially reduce the cost of borrowing by one-third or more. ▪ Property tax deduction: Homeowners can deduct from their federal income taxes state and local property taxes paid on the home. ▪ Deductible homebuying expenses: Several closing costs in a home purchase are also deductible, such as loan origination fees (points), prorated interest on a new loan and prorated property taxes paid at settlement. ▪ $250,000/$500,000 home-sale exclusion: Homeowners who have lived in their home for two of the prior five years prior to sale do not have to pay income tax on the majority of their profit – $250,000 for single homeowners and $500,000 for married homeowners who file jointly. ▪ 14 days of free rental income: Homeowners can rent the home up to 14 days during the year and pay no tax at all on the rental income. Source: “The Tax benefits of homeownership,” Inman News (Feb. 4, 2011) © Copyright 2011 INFORMATION, INC. Bethesda, MD (301) 215-4688