Tax Return Depressing? Owning a Home Could Help

Home / Blog / Tax Return Depressing? Owning a Home Could Help

Tax Return Depressing? Owning a Home Could Help

Many Americans got some depressing news last week; either their tax return was not as large as they had hoped or, in some cases, they were told they owed additional money to either the Federal or State government or both. One way to save on taxes is to own your own home.

According to the Tax Policy Center’s Briefing Book -“A citizen's guide to the fascinating (though often complex) elements of the federal Tax System” - there are several tax advantages to homeownership.

Here are four items, and a quote on each, from the Briefing Book:

1. Mortgage Interest Deduction

“Homeowners who itemize deductions may reduce their taxable income by deducting any interest paid on a home mortgage. The deduction is limited to interest paid on up to $1 million of debt incurred to purchase or substantially rehabilitate a home. Homeowners also may deduct interest paid on up to $100,000 of home equity debt, regardless of how they use the borrowed funds. Taxpayers who do not own their home have no comparable ability to deduct interest paid on debt incurred to purchase goods and services.”

2. Property Tax Deduction

“Homeowners who itemize deductions may also reduce their taxable income by deducting property taxes they pay on their homes.”

3. Imputed Rent

“Buying a home is an investment, part of the returns from which is the opportunity to live in the home rent-free. Unlike returns from other investments, the return on homeownership—what economists call “imputed rent”—is excluded from taxable income. In contrast, landlords must count as income the rent they receive, and renters may not deduct the rent they pay. A homeowner is effectively both landlord and renter, but the tax code treats homeowners the same as renters while ignoring their simultaneous role as their own landlords.”

4. Profits from Home Sales

“Taxpayers who sell assets must generally pay capital gains tax on any profits made on the sale. But homeowners may exclude from taxable income up to $250,000 ($500,000 for joint filers) of capital gains on the sale of their home if they satisfy certain criteria: they must have maintained the home as their principal residence in two out of the preceding five years, and they generally may not have claimed the capital gains exclusion for the sale of another home during the previous two years.”

Bottom Line

We are not suggesting that you purchase a house just to save on your taxes. However, if you have been on the fence as to whether 2017 is the year you should become a homeowner, this information might help with that decision.

Disclaimer: Always check with your accountant to find out what tax advantages apply to you in your area. 


d56156fb 2cc3 4ac5 92cb e6e0a183fa7b 84ecef17 d4c7 4482 b54f 59bccdd7d225 f4461133 fee8 4b57 bcf1 eb68bd07bdc2 69fbc5cb 5e93 4674 bd33 4517588ba8a6 524b3d9c 3fd8 4f12 bef9 161ad2432a1b 38482bfc 956b 4e76 a8a5 4abc71a76aba fa24fdb5 a2a8 4f1b b27c 99fc3633d920 121f79f3 4126 4971 93c3 1a83bd43226c 24065e03 f869 4781 8768 87d30a998666 cdc9dbbd 0d10 4a8e bc2a 854806ef883a f5825910 f393 42a1 8f51 4989704a180d a1221af4 f515 4c9e 9065 d80c497c7008 78a3150e 2551 47ab b1b1 1a0cbdbd94ae 39dc3178 1c27 41d8 b856 7b28a58bcb07 c86143c6 28dc 419d bab3 20a93f31f2fa b8058e17 1ab6 4e27 a0c9 78449b6214ef bf00df24 9177 47d2 88ed 274ec7430601 01e82406 81ce 4ba2 bff7 4efe343ab146 6f6d6352 069b 4318 9431 767bf61bd678 f224556d 27a6 4026 86da ed26682bf0a4 215bb718 5de4 4cd2 ae43 4c6c716b49d0 4c90b6ee 553f 461b 82ba d58afeb0d531 b42e2bb7 c3d5 4b6d be39 03156179ee30