Owning a house is a big achievement, and even the government realizes that you have made big sacrifices. In a bid to reward your efforts, the government offers homeowners the following tax benefits:
Any interest charged on mortgages up to 1 million dollars is tax allowable. The $1 million principal only applies if you are married and you file your returns jointly. If you file your returns separately, then the allowable amount is only $500,000. The loan must also be secured by a first or a second home. If you pay your home in cash, any loan taken with the home as collateral is not tax allowable.
Interest on home improvement loans.
A home improvement loan qualifies for tax deductions, but a loan for repair works does not qualify for tax deductions. A qualifying loan is the one which is taken for home improvements. These improvements add value to your home and extend its life. They may include adding new garages or building extension houses.
Repair works do not add value to the home but rather restores it to the place it was before degradation.
These are tax deductible as long as they are filled and deducted from the current income. Any money held in a separate account and is the one used to pay the property taxes does not qualify for tax deductions.
Home office deductions,
If you use your home to store products which you regularly use in business or some part of your home is used as an office for your business; then you qualify for tax deductions.
You can reduce your income tax by the value of selling expenses which have been associated with selling the house. The selling costs must be incurred 90 days before the actual selling date of the house.
Capital gains exclusions,
These are deductions allowed on your income due to the high capital you spent in acquiring the property. If you sell a house which you have occupied for more than two years, you can keep up to $500, 000 as tax-free profit if you file your tax returns together or half of that amount if you file returns separately.
Mortgage tax credit
It is a tax program meant to take care of first home owners so that the tax burden is not very heavy on them. The government allows you to offset up to 20% of the mortgage interest paid from your taxable income.
Equity loan interest
The tax deduction amount allowed is limited to $100,000 for married couple who file their returns jointly or $50,000 for people who file their tax returns separately.
Any refinancing efforts resulting into more debts are tax allowable at the applied rate of 1% per point.
In case there is any section of the tax system you do not understand well, it is better to seek the services of a qualified accountant so that he can help you in submitting correct figures.