Do you Know All 5 Tax Advantages of Being a Homeowner?

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The new tax law signed on Dec 22th, does not comes into effect until the 2018 tax season which is for next year filings. Therefore for now on the 2017 tax season this article still applies.  

Numerous benefits are offered to homeowners that effectively reduces the taxes they have to pay. Homeowners can deduct mortgage interest, property tax payments and the very important capital gains.

 All of these benefits are worth more to taxpayers in higher-income tax brackets than to those in lower brackets. The downside is that to take full tax advantage of your home, you’ll have to itemize your taxes which is more complicated because you have to detail your tax-deductible expenses.

Here are the top 5 tax advantages of being a homeowner:


Homeowners can reduce their tax bill by deducting the interest paid on their home mortgage. Since most of their mortgage payment is interest during most of their life of the loan, this is the biggest tax break they can get. This applies as long as the debt on the home does not exceed 1 million dollars or if the equity debt is less than 100,000 regardless of the way they obtained the funds.

This also applies for mortgage insurance premiums. If you put down less than 20% for down payment, chances are that you paying a mortgage insurance. This expense that is added to your mortgage can also be deducted from taxes.


You can also deduct the property taxes you pay each year. Since property taxes average around $2,000 in the Orlando area, this represents major savings too.

Note you can't deduct payments into your escrow account as real estate taxes. Your deposits are simply money put aside to cover future tax payments. You can deduct only the actual real estate tax amounts already paid out of the account during the year.


When you buy a house, you are investing in an asset. Part of those returns are the ability to live the home rent free. But reality is that you are both a landlord and a tenant. Economist call this imputed rent. In some countries such as Iceland, Netherlands and Switzerland, they tax this type of income. In the USA it’s excluded from taxable income.


If you sell assets like stocks or bonds, you may normally pay taxes on the capital gains. Homeowners instead, are able to exclude those gains from their taxable income up to $250,000 for singles and $500,000 for joint couples. To be able to qualify for this exclusion they have to have maintained the property as their principle residence in 2 of the preceding 5 years.


You can save on taxes if you did improvements on you home by using those expenses to show reduced capital gains and effectively reduce your tax bill. If you kept the receipts of the expenses in home improvements, when you sell your home you can add the costs of the improvements to the purchase price which will increase the cost basis, thus show a lower capital income

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