Being a home owner, your actual shelter, IS YOUR BEST TAX SHELTER. As soon as you buy your home your tax-cutting opportunities start and continue until you sell it.
Your deductions include all or part of your mortgage interests, the points you paid to get the loan, interest on certain home equity loans, and your annual property tax payments. These write-offs are helpful in reducing your tax bill each filing season.
Another great thing is there is the profit on your home’s sale. So far the IRS can’t touch that money!
According to Mark Luscome, principal federal tax analyst at CCH in Riverwoods, Ill., who is a provider of tax information and services says, "The biggest thing in real estate that would apply to most people is the primary residence sale exclusion."
This tax code provision gives up to $250,000 in sale profit for a single taxpayer, twice that for a married couple filing a joint return, is not taxed. "If you sell before your gain gets to that point, you can avoid ever having to pay tax on the residence," says Luscombe.
The beauty of this home-related tax shelter is that it applies to every principal residence you ever own as long as you meet the IRS rules. The key requirement is that you live in the home two of the five years before you sell.
According to Bod D. Scharin, senior tax analyst from the Tax & Accounting business of Thomson Reuters in New York City, "There are instances where people will buy a fixer-upper and live there for two years while fixing it up and then sell it at a profit. And though a lot of that profit can be attributable to their sweat equity, they still qualify for home sale exclusion,"
All in the Day of a Realtor- Real Estate Happenings in Salt Lake City and Beyond...
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