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First, mortgage interest on loans up to $1 million is completely deductible for the year in which you pay it to buy, build or improve your principal residence plus a second home. You can also deduct points you pay to refinance your home - over the life of the loan. You can deduct points paid when you purchase your home in the year paid, no matter who pays them, the buyer or the seller.
When you sell your home, you probably won’t need to worry about capital gains taxes if you own and live in your home at least two years. The exclusion has been raised to $500,000 for married couples and $250,000 for single owners.
What tax breaks can I get by owning a home?
Homeowners benefit from several generous tax advantages.
The most important benefit is the mortgage interest deduction. You
can deduct interest paid on mortgage loans totaling up to $1 million
used to buy, build or improve a principal residence plus a second home.
You get Form 1099-INT at the end of the year that shows your deductible
interest. When you get a new mortgage, however, you usually pay interest
from the closing date until the first of the next month with your closing
fees. Find out whether that charge is included in the year-end report.
You can deduct points that you or the seller pay on a new mortgage loan
for the purchase or improvement of a principal residence. Deduct the
points in the year you purchase the home.
You can also deduct any points you pay on a refinance mortgage, a loan
to purchase a second home or a mortgage on income property. Deduct these
points over the life of the loan.
You can deduct property taxes on all real estate, including taxes levied
by state and local governments and school districts.
You may be able to deduct moving expenses if you change jobs and must
relocate.
You cannot deduct maintenance expenses or depreciation on your home
unless you use it for business purposes.
What is my standard deduction if my parents claim me as a dependent
on their return?
Your standard deduction if someone else can claim you as a dependent may not exceed the greater of:
$850 (in 2006 and 2007)
The sum of $300 and the individual’s earned income.
More Questions?? Email Tax Help Office