Owning a property can help you benefit from the property tax deduction. This can actually be broken down in to several separate advantages. This tax deduction is actually a general deduction encompassing many. Some of the areas that advantages can be taken in that are included in the deduction are listed below.
One area that is included in this tax deduction is any interest paid on your mortgage. This is because the interest you collect on your house is also deductible up to a maximum of $1 million.
Another part of this deduction is what is called fee points, which are points that are associated with a home acquisition mortgage. Because each one is worth 1% this can really add up when it comes to taking advantage of this portion of the deduction.
Something else that is part of this deduction is equity loan interest. This interest that is the amount that you would pay on a home equity loan is only partly deductible, not fully. This part of it has a few regulations that must be followed according to the Internal Revenue Service.
A few other things that can be included in applying for the tax deduction includes home improvement loan interest and the home office deduction. With the home improvement interest you cannot include anything considered a repair. But with the home office deduction you can include any part of your home used for business, and can include repairs.
One thing that is a fairly big part of the deduction is the selling costs. These can include the real estate broker's commissions, title insurance, legal fees, advertising costs, administrative costs, and inspection fees. By taking advantage of this part of the property deduction you can lower your taxable capital gains.
This leads us to the capital gains exclusion that is part of the property tax deduction. If you have lived at your residence for at least two of the last five years then you are excluded from having to pay a capital gains tax. Married who file jointly have a limit of $500,000, while single or married filing single have a limit of $250,000 in the amount than keep in profits from any sale.
A small side note regarding moving and this deduction, is that if you relocate due to your job, you can include deductions related to the cost of this move. This deduction though is not quite as easy to take advantage of because of some of the IRS regulations regarding it.
The fact also that your property tax deduction is completely deductible from your federal income taxes among these other benefits, definitely makes it worth looking into.
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