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Before a home owner curses the troubled housing market, he or she should remember that the U.S. tax code makes buying a home a good deal for almost everyone.
Here’s why:
Mortgage interest deductions, including in some cases mortgage insurance premiums, reduce home owners’ tax liability by reducing income. The deduction includes interest paid on both a first and a second home.
Interest on home equity loans is also deductible — whether the borrower uses the money to remodel the kitchen or to take a vacation to Disney World.
Profits from selling a house are potentially a huge windfall. When a home owner sells a primary residence, any profit on the sale of the property is tax free up to $250,000 for single home owners and $500,000 for married home owners filing. Any profit above that is nearly always a long-term capital gain taxed at 15 percent — less if the seller’s tax rate is less than 20 percent.
Home owners can itemize. That opens up opportunities to deduct a host of other items that wouldn’t be deductible if the taxpayer took the standard deduction.
Source: The Boston Globe, Leonard Wiener (03/02/08) via REALTOR® Magazine Online
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