Life as a homeowner has it’s ups and downs.
Transforming a new house into a unique space to call your home is a perfect example of the upsides to being a homeowner. On the downside, there’s the painful chores of fixing broken appliances and of course, paying the dreaded ongoing costs and taxes associated with owning a home.
Whether you have just entered the home owning universe and bought a home over the last year, have been a homeowner, or recently sold your home, there’s no doubt you have faced home owning costs and taxes. Although there’s no way to escape them, there are tips to help lower your taxes when filing your 2013 taxes.
Top 5 Real Estate Tax Tips, Worthy of Writing Down
The following tips for real estate taxes will leave you with more money (and energy) to instead use towards transforming your home into your dream estate.
1. Mortgage Interest- As you (hopefully) know, a large chunk of your monthly house mortgage payment, goes towards interest. As long as the loan for your home is under $1 million, this interest is tax deductible. You can also generally deduct equity debts of $100,000, or less.
2. Points- If you paid points to receive an improved home loan rate, you can deduct the points in the same year you paid them off (as long as the loan was used to purchase or build your home). If you’re a homeowner who paid points on a refinanced loan, the points are deductible over the life of the loan.
3. Property Taxes- Chances are you paid both state and local property taxes. As long as you own your home, property tax is an annual deduction. If you bought your home during the tax year, you were left with a property tax dividend when you purchased the property. This dividend amount will be fully tax deductible.
4. Selling a House- If over the last five years, you lived in your home for at least two years, before selling it, and as long as you owned your home for at least two years, then $250,000 of your sales gain is tax-free. If you’re married, filing jointly, the tax-free amount doubles to $500,000.
If you didn’t live in your house for two of the last five years before selling it, or you were shy of the two year owning time, plan to pay tax on your profits. However, if you had to sell because you gave birth to triplets and need a bigger house, divorced your husband (or wife), or you were forced to sell due to another unforeseen circumstance, there’s tax relief.
The tax relief allows you to qualify for the full tax break ($250,000), if you sold due to;
- health issues
- death
- divorce
- job loss (which qualifies for unemployment compensation)
- employment changes
- multiple births from the same pregnancy
5. Foreclosure- Thanks to the Mortgage Debt Relief Act of 2007, debt up to $2 million (or $1 million if married filing separately) is not taxable for homeowners who;
- foreclosed
- completed a short sale
- had home debt reduced by mortgage restructuring
Let’s be honest, owning a home is usually more attractive than renting (and much more attractive than living with your parents or friends). However, the list of taxes related to owning real estate are far from attractive. The good news is, RapidTax tax filing program is designed to help you save on these taxes.
Fling your 2013 taxes with RapidTax will help make the upsides of home owning outweigh the downsides!
2/7/2013 Photo via Denis P on Flickr
