Buying and owning a home offers tax savings that can add up to thousands of dollars.
Many home owners in Chattanooga and the surrounding area rely on these benefits to help offset the costs of homeownership, while prospective buyers take them into consideration as a huge advantage over renting. As tax season approaches, area home owners are taking another look at how their investment can mean big savings during this time of year.
Home owners who itemize their federal income tax deductions can deduct 100 percent of their mortgage interest payments on a first or second home, up to a maximum mortgage amount of $1 million. They can also deduct the interest paid on up to $100,000 of home equity loans.
The ability to deduct home mortgage and home equity loan interest isn’t the only tax benefit for home owners. They can also deduct the state and local real estate taxes they pay each year on an owner-occupied home.
And when they decide to sell their home, many home owners don’t have to pay capital gains tax on profits from the sale. Married couples who have owned and occupied their principal residence for at least two of the past five years do not have to pay any taxes on the first $500,000 in profits from the sale of their home. Single filers earn up to $250,000 tax free.
Mortgage insurance premiums offer another potential deduction for home owners. Generally, people who purchase a home without putting 20 percent down must buy mortgage insurance, and those premiums can also be deducted from taxable income.
Even home owners who don’t use the home as their principal residence and rent it out may be able to enjoy some tax benefits, including interest and depreciation deductions.
Tax benefits like these – particularly the mortgage interest deduction, which has been included in the tax code for more than 100 years – have been key in developing the American dream and supporting the aspirations of countless families at all income levels who want to become established home owners in the greater Chattanooga metropolitan area.
Contact Home Builders Association of Greater Chattanooga at 423.624.9992 to find out about homeownership opportunities in the Chattanooga area.