July 25, 2024
Buying a home is the single most valuable investment most families make, and homeownership offers tax breaks that make it the foundation for your overall tax planning. The tax law provides numerous incentives to homeownership, including the following:
Buying, rather than renting, replaces nondeductible rent with deductible mortgage interest.
Taxpayers can deduct up to $10,000 of combined property and income tax annually.
Homeowners can exclude up to $250,000 of gain ($500,000 for married couples filing jointly and certain surviving spouses) from taxable income when they sell.
There is no penalty for an early withdrawal from an IRA for a “first-time” homebuyer for up to $10,000 so long as the proceeds are used for acquisition of a home.
Self-employed individuals may deduct expenses for a portion of the home used for business. A simplified optional method for claiming a home office deduction is now available.
The exclusion from gross income for discharges of qualified principal residence indebtedness before January 1, 2026.
Energy credits for environmentally friendly and ecologically responsible home-related expenditures, including:
o Energy efficient home improvement credit for qualified property placed in service before
January 1, 2033, and
o Residential clean energy credit for qualified energy efficiency improvements placed in
service before January 1, 2035.
You may benefit from a close review of these provisions, particularly if you are considering transactions involving your home, including selling, refinancing, or renting. Many homeownership tax benefits also apply to a second home.
The IRS website also explains the tax benefits for homeowners, so if you are interested, please refer to the links below as well.
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