Home ownership is a big responsibility. Many people bristle at the idea of yard work, interior remodeling, and other responsibilities associated with property improvement and maintenance, but the truth is, when you pour your efforts—and your personal aesthetic—into your living space, you have more than just a house. You have a home. A place where memories are made. A place generations of family can return again and again. Yes, home ownership is a lot of work, but it comes with wealth of rewards that simply cannot be measured.
There are monetary costs associated with home ownership, but there are also tax breaks. Homeowners who meet certain occupancy and holding period requirements may be eligible for gain exclusion on any profits from the sale of their house. Tax deductions may also be made for real estate taxes and home mortgage interest. Because of the gain exclusion, married couples who choose to buy a “fixer-upper” home to improve and then resell can exclude up to $500,000 in profit from the property’s sale as tax-free income. This is a good option for handy people who are willing to update old fixtures and appliances, paint walls, or replace worn carpet. These may seem like small repairs, but in reality, cosmetic improvements can add at least $2 in market value for every $1 spent.
Unfortunately, many homeowners miss out on some of these tax breaks because they have only limited knowledge of tax rules. Every homeowner’s situation is a little bit different, but a tax professional can help you accurately assess your tax situation as it applies to home ownership. Whether you’ve owned your home for years or you are just starting to house hunt, it is a good idea to make sure you take full advantage of the benefits available to you.
Have questions about home ownership and your taxes? Just ask. The Taxation Solutions, Inc. team is here for you.