{"id":204,"date":"2014-02-25T17:12:58","date_gmt":"2014-02-25T17:12:58","guid":{"rendered":"http:\/\/mikeclover.com\/blog\/?p=204"},"modified":"2018-04-14T10:57:30","modified_gmt":"2018-04-14T10:57:30","slug":"real-estate-and-your-federal-income-tax","status":"publish","type":"post","link":"https:\/\/www.mikeclover.com\/blog\/2014\/02\/25\/real-estate-and-your-federal-income-tax\/","title":{"rendered":"Real Estate and Your Federal Income Tax"},"content":{"rendered":"

Will buying a home reduce my income tax liability?<\/span><\/b><\/p>\n

Real estate\u00a0professionals dealing with the best Hilton Head real estate areas<\/a> like to tell prospective buyers that owning a home will allow them to itemize deductions and thus give them a reduction in income taxes. That may be true and it may not. <\/span><\/p>\n

Right now the standard deduction is $12,200 for married taxpayers filing jointly; $8,950 for head of household; and $6,100 for individual taxpayers. If the interest you pay, plus points, mortgage insurance, and property taxes are less than those amounts, you’ll only benefit if you have other deductions to push up the total. <\/span><\/p>\n

Other itemized deductions that can be added to your real estate deductions on Schedule A are medical expenses in excess of either $7,500 or $10,000 (depending upon your birth date), unreimbursed employee business expenses, casualty and theft losses, and charitable donations.<\/span><\/p>\n

What if I profited from the sale of my home last year? <\/span><\/b><\/p>\n

As long as you lived in your home for 2 of the past 5 years, you get a break. The first $250,000 profit ($500,000 if filing jointly) is excluded from income tax liability. Profit exceeding those amounts is subject to Capital Gains tax. <\/span><\/p>\n

Unfortunately, you aren’t allowed to take a deduction if you sold at a loss.<\/span><\/p>\n

Will buying investment property reduce my taxes? <\/span><\/b><\/p>\n

Investment property is addressed on a different form, and you are allowed a deduction if you have a loss. <\/span><\/p>\n

While you do have to declare your rental income, you can offset that income with all the expenses related to owning the property. That includes points, mortgage insurance, mortgage interest, taxes (including the case of duplicate PAN card<\/a>), insurance, utilities, cleaning, rental management, travel, and repairs. You are also allowed to depreciate the real property (but not the land under the house.) <\/span><\/p>\n

Because your deductions may be limited if you earn more than $125,000 per year, it’s wise to confer with a knowledgeable tax advisor to learn the most advantageous way to take title and to set up your related accounting procedures. <\/span><\/p>\n

What if I purchased a second home? <\/span><\/b><\/p>\n

Interest and property tax on your second home are deductible, but again will only give you a tax break if they exceed the standard deduction when combined with other allowable deductions on Schedule A. <\/span><\/p>\n

If you combine personal use with renting the house to others, your tax treatment will depend upon how many days you were in residence. Get tax advice in advance to avoid an expensive mistake. <\/span><\/p>\n

We advise consulting an expert in order to take advantage of every tax break. However, in order to better understand that expert advice, we suggest reading the IRS <\/span>Publication 530 (2013), Tax Information for Homeowners<\/span><\/a>, published on IRS.gov.<\/span><\/p>\n

 <\/p>\n

Mike Clover <\/strong><\/p>\n

Mortgage Banker<\/p>\n

Homewood Mortgage, LLC<\/p>\n

Toll FREE: 1-800-223-7409<\/p>\n

O: 469-438-5587<\/p>\n

F: 972-767-4370<\/p>\n

NMLS# 234770<\/p>\n

Web: www.mikeclover.com<\/a><\/p>\n

 <\/p>\n","protected":false},"excerpt":{"rendered":"

Will buying a home reduce my income tax liability? Real estate\u00a0professionals dealing with the best Hilton Head real estate areas like to tell prospective buyers that owning a home will allow them to itemize deductions and thus give them a … Continue reading →<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[1],"tags":[],"_links":{"self":[{"href":"https:\/\/www.mikeclover.com\/blog\/wp-json\/wp\/v2\/posts\/204"}],"collection":[{"href":"https:\/\/www.mikeclover.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.mikeclover.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.mikeclover.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.mikeclover.com\/blog\/wp-json\/wp\/v2\/comments?post=204"}],"version-history":[{"count":5,"href":"https:\/\/www.mikeclover.com\/blog\/wp-json\/wp\/v2\/posts\/204\/revisions"}],"predecessor-version":[{"id":758,"href":"https:\/\/www.mikeclover.com\/blog\/wp-json\/wp\/v2\/posts\/204\/revisions\/758"}],"wp:attachment":[{"href":"https:\/\/www.mikeclover.com\/blog\/wp-json\/wp\/v2\/media?parent=204"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.mikeclover.com\/blog\/wp-json\/wp\/v2\/categories?post=204"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.mikeclover.com\/blog\/wp-json\/wp\/v2\/tags?post=204"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}