Tax season is rapidly approaching. If you’re a homeowner, your home can provide a variety of ways to help you save on your taxes.
Using your home for deductions
Mortgage interest and real estate taxes are deductible each year on your tax returns. Not only that, but if you purchase a home or refinance, discount points and origination fees can also be deducted. These discounts could save you thousands of dollars per year in taxes.
Homebuyers were eligible for a tax credit if they entered into a purchase contract by April 30, 2010 and had their home closed by September 30, 2010. For military personnel, those dates were extended and they have an extra year to qualify for the credit. To be eligible, military personnel must enter into a contract by April 30, 2011 and close on the purchase by June 30, 2011.
Other tax benefits of owning a home
For most people, their home is their largest investment. Despite the recent dips in the market, homes have historically risen in value above inflation. Since 1968, homes have appreciated an average of 5.4% per year. In addition, if you sell a home that you have had as a primary residence for two of the past five years, you can make up to $250,000 tax-free over the initial purchase price as a single-filer (or $500,000 for married couples).
You should always consult your tax advisor to ensure that you maximize your tax benefits. As you build equity in your home, it can provide an important financial tool to help you accomplish your financial goals.