Owning real estate can really pay off at tax time! Here are some deductions that may be available to you. Consult your tax adviser or visit the IRS website to see which apply to your situation…
1. Mortgage interest: Interest you pay on your home loans, whether for your primary residence or second home, is tax-deductible.
2. Capital gains: If you sold your home last year, you can exempt the first $250,000 of profit ($500,000 for married taxpayers filing a joint return). The home must have been the seller’s primary residence for two of the last five years.
3. Points on a home purchase: If you bought a home last year, the points you paid to get a lower interest rate are tax-deductible for that year.
4. Points on refinancing: The points you pay to get a lower interest rate on a home purchase loan are tax-deductible for that year. If you’ve refinanced before, and you have points from the previous refinance that haven’t yet been deducted, you may take a full deduction on the remaining points for the earlier loan.
5. Real estate and property taxes: State and local property taxes are deductible in the year they are paid.
6. Repairs to rental property: The costs of repairs to rental properties are fully deductible in the year in which they are incurred. Examples include fixing leaks, patching plaster and replacing broken windows.
In addition to these deductions, buyers entering into a purchase contract by April 30th, 2010 may be eligible for a tax credit.