On the Fence About Buying a New Home? Tax Benefits of Home Ownership

Below are some of the great tax benefits

of owning a home as seen on Maine Today.

Deductions:

Mortgage Interest:Mortgage interest is fully deductible from your tax returns. Since mortgage payments in the early years of a loan are mostly interest, this tax break has long helped buyers afford their new homes. The deduction is allowable on up to $1,000,00 in loan proceeds used to purchase a primary and/or second home.

Property Tax: Any local or state property taxes paid on your home from your federal tax returns is fully deductible.

Points paid on Home Mortgage: Fully deductible in the year they are paid.

Here is an example of the kind of tax benefits you can receive.

Say you purchase a home on Feb. 15th. for $250,000 and put $50,000 down. You have a 30 year fixed-rate mortgage at 6.17 percent and two points paid.

Mortgage Interest: $9,749

Two Points Paid (2%) $4,000

Property Tax: $4,750

Total Deduction Allowable: $18,499

Additional Tax Benefits:

If you spend money on certain home improvements and you save the receipts and records, you can reduce the amount of capital gain when you sell.

Also, if you sell your home and have a gain, it is not taxable if its no more then $250,000 for single person or no more then $500,000 for a married couple. To receive this benefit you must have lived in the home for at least two of the five years prior to the sale of the property.

Finally, if you use a part of your home exclusively and regularly for business, you may be entitled to a home office deduction.