Smith & Gesteland Quick Tip

Owning Your Home - The Pleasant Tax Surprise

Owning your own home can offer you many rewarding personal benefits. It can also provide you with potential tax saving opportunities. If you're thinking of buying or you have recently invested in your first home, you should take a look at the tax savings home ownership can provide.

Itemized deductions can reduce your taxes
Homeowners generally do better itemizing rather than taking the standard deduction amount. That's because the following home-related expenses are generally deductible:

· Real estate taxes paid . Remember that you can increase your deductions for a particular year just by paying your tax payment in December, before the payment is actually due in January.

· Mortgage interest paid on a home loan.

· Home equity loan interest paid , even if the loan proceeds are used for expenses that are not home-related.

Gain on the sale is usually tax-free
How often does the IRS let you get away with making a profit without taking a share of the pie? The sale of your home is one of the few cases where the IRS lets you keep everything you've earned. Your gain on the sale of your home will not be taxed if:

· You owned and used the property as a principal residence for two out of the five years prior to the sale,

· You did not sell another principal residence in the two years prior to the sale,

· No portion of the residence was used for rental or business purposes. If a portion was used for rental or business purposes, only a part of the gain will be tax-free;

· The home is not sold for a gain greater than $250,000 for a single taxpayer and $500,000 for joint filers.

For further information about the tax savings related to owning your own home, please call Ellen Markey or Julie Bogle at (608) 836-7500 .