Buying a home is the single most valuable investment most families make, and home ownership offers tax breaks that make it the foundation for your overall tax planning. The tax law provides numerous incentives to home ownership, including the following:
- Buying, rather than renting, replaces nondeductible rent with deductible mortgage interest.
- Taxpayers can deduct an unlimited amount of property tax they pay on any number of residences.
- Homeowners can exclude up to $250,000 of gain ($500,000 for married couples filing jointly and certain surviving spouses) from taxable income when they sell.
- There is no penalty for an early withdrawal from an IRA for a "first-time" homebuyer for up to $10,000 so long as the proceeds are used for acquisition of a home.
- Self-employed individuals may deduct expenses for a portion of the home used for business.
- An energy credit is available for qualified residential alternative energy expenditures.
- A temporary provision excludes the discharge of "qualified principal residence indebtedness" from gross income.
Please do not hesitate to call the Certified Public Accountants at Wood, Johnson, Heath, P.C. at 512-343-8075 if you have any questions about these or any tax developments.