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What are the Tax Benefits of Owning a Home

What are the Tax Benefits of Owning a Home?

Amherst, NH Homeowners Looks for Future Tax Advantages

There are many tax advantages for homeowners, particularly when itemizing your taxes. If you have a mortgage on your home the interest paid each year can be deducted from your taxable income. This is only available if you are itemizing your taxes, as opposed to taking the standard deduction. If you have a home equity loan, this interest can also be deducted when filing your taxes. For those self-employed individuals, the space in the home used for business purposes can be deducted including heat, utilities, and insurance, saving you money on your overall tax bill.

An Amherst resident had just purchased her first home. Wondering how this would affect her tax bill at the end of the year, she contacted Merrimack Tax Associates for advice.

Medically Necessary Home Improvements May Be Tax Deductible

Home improvements that are made to the home out of medical necessity may be eligible for a tax deduction. These include adding wheelchair ramps, widening doorways, installing bathroom grab bars, and adding stairlifts. If there is no effect on the property value through these improvements, you can likely deduct the entire expense on your taxes. When property values are increased by these medical home improvements, you will only be eligible for a partial deduction.

Capital Gains Exclusion When You Sell the Home

This is one of the biggest tax saving opportunities when homeowners sell their property. With the capital gains exclusion, you may not have to pay taxes on all the profits that you gain from the home’s sale. This is limited to $250,000 for single filers and $500,000 for those married couples filing jointly. To qualify, you must have owned the home as your primary residence for at least two of the last five years. The tax savings on these capital gains can be very substantial.

The Amherst homeowner was pleased to hear that the mortgage interest she paid throughout the year can be deducted on her taxes and she looks forward to seeing these savings when she files her taxes.

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