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Here's the great news: A part of your mortgage payment is actually paid by the government!
You may take advantage of the following deductions:
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mortgage interest
subject to limitations based on the amount of the loan, the interest paid on the mortgage is an itemized deduction
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real estate taxes
property taxes paid for the residence are allowed as an itemized deduction |
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loan origination fees
points for a loan initiated to facilitate the original purchase of a residence are deductible as mortgage interest |
How much the actual tax savings will be depends on your particular situation. You should ask your realtor or mortgage broker and, especially, your tax advisor to help you figure out what your tax situation will be.
Another good pieces of news is that most homeowners can now sell their home without being taxed on sales profits. Most married couples, filing jointly, can now shelter home-sale profits of up to $500,000 (singles shelter $250,000) regardless of whether they buy another home.
This means that deferring taxes doesn't require you to reinvest your profits into another home of equal or greater value within two years. You are no longer pressured into buying a new home right away. You may find it advantageous to sell your home, rent for three or four years, and then buy a new home. It also means you may trade down to smaller, less expensive home.
There are a few rules you'll need to follow to take full advantage of the tax break, such as owning and living in the home as your principle residence at least two years before selling it. You should consult with a real estate expert or your financial advisor to learn all the details.
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