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ArticlesTax WealthTop Ten Real Estate Tax Breaks

Top Ten Real Estate Tax Breaks

Here’s a look at the Top 10 Real Estate Tax Breaks for the homeowner/investor.

Real Estate Tips 1-3

1. Mortgage Loan Interest: Deductions reduce your taxable income against which your taxes due are calculated.2. Home Improvement Loan Interest: You can deduct all the interest on a home improvement loan provided the work is a “capital improvement” rather than repairs, maintenance or cosmetic upgrades. Capital improvements typically increase your home’s value.3. Points: You can fully deduct points associated with a home purchase mortgage, but not a mortgage broker’s commission.

Homeowner Tips 4-6

4. Property Taxes: Property taxes or real estate taxes are fully deductible. Any local city or state property tax refunds reduces your federal property tax deduction by the same amount.

5. Capital Gains Exclusion: Allows married taxpayers who file jointly to keep, tax free, up to $500,000 in profit on the sale of a home used as a principal residence for two of the prior five years. The amount is halved for those filing single or separately

6. Home-Based Business Deduction: Home offices that use a portion of your home exclusively for business could qualify you to deduct a percentage of costs related to that portion. Included are a percentage of your insurance and repair costs, utility bills and depreciation.

Tax Break Tips 7-9

7. Selling Costs and Capital Improvements: When you sell your home, you can reduce your taxable capital gain by the amount of your selling costs, which include real estate commissions, title insurance, legal fees, advertising and inspection fees. Costs typically stemming from decorating or repairs — painting, planting flowers, maintenance — are also selling costs if you complete them within 90 days of your sale and with the intention of making the home more saleable.

8. Moving Costs: To qualify, you must meet certain requirements including, moving within one year of starting your new job, moving 50 miles farther from your old home than your old job was and working full-time at the new job for 39 of 52 weeks following the move. Deductions include travel or transportation costs and expenses for lodging and storing your household goods.

9. Mortgage Tax Credit: Mortgage Credit Certificates (MCCs) allow qualifying low-income, first-time home buyers to take a mortgage interest tax credit of up to 20 percent (the amount varies by jurisdiction) of the mortgage interest payments made on a home.

Finally, Tip 10 and conclusion 

10. Energy Tax Credits: The newest home-based tax credits were made possible last year by the Energy Policy Act of 2005. Tax credits of up to $500 in 2006 and 2007 are available for upgrading heating and air conditioning systems, insulations, windows, doors and thermostats, caulking leaks, installing pigmented metal roofs and for otherwise reducing energy waste in your home.

In the end, just like other investments, choosing to invest solely for the tax advantages is rarely the best strategy.  However, if you do not own real estate yet, you have to live somewhere, and rent typically just goes down the drain.  So, why not, if you can afford it, look to purchase a place you can live?

We hope you found this article about “Top Ten Real Estate Tax Breaks” helpful.  If you have questions or need expert tax or family office advice that’s refreshingly objective (we never sell investments), please contact us or visit our Family office page  or our website at www.GROCO.com.  Unfortunately, we no longer give advice to other tax professionals gratis.

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Considerately yours,

GROCO, GROCO Tax, GROCO Technology, GROCO Advisory Services, GROCO Consulting Services, GROCO Relationship Services, GROCO Consulting/Advisory Services, GROCO Family Office Wealth, and GROCO Family Office Services.

Alan Olsen, CPA



Alan L. Olsen, CPA, Wikipedia Bio



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