Article Directory :: Finance & Investment Articles

Your House A Tax Shelter

By Kate Ford

Republish: EasyPublish™ Published: 03Nov2008 Word count: 664 Viewed: 296 time(s) Get Free Content For Your Site

Do you remember hearing your house can act as a tax shelter?

As you read every word of this article, you will discover some of the incredible tax advantages of home ownership.

The government wants to encourage you to own your home. Therefore it allows a home owner to deduct certain costs you may incur from owning a house. In effect, the tax code allows you to reduce some of your out-of-pocket costs related to buying and owning your home.

Expenses related to home ownership can be tax deductible. You can also profit from the sale of your home tax free as well as borrow, reaping tax-free funds.

Almost everyone agrees buying a home is probably the single most important purchase you will ever make and you are likely to live in your house for many years. There are costs of home ownership that are tax deductible and there are costs that do no qualify for deductions on your tax return. Always consult an accountant for up-to-date information regarding any tax issues.

Two deductions for home ownership expenses are property taxes and mortgage interest. Here is an example of how it works.

At the end of the year, your mortgage lender(s) will send you the total of interest you paid on your mortgage for the previous year. You should also have a property tax bill for property taxes the previous year.

Let's suppose that your mortgage interest last year totaled $12,000 and your property taxes amounted to $3,000 for a total of $15,000. If you are in the 28% tax bracket your actual costs out-of-pocket would be $10,800. So the deductible value is $15,000 X 28% or $4.200.

Caution: Home owners in high-income brackets are advised to seek counsel from a qualified financial adviser. You could lose some of these benefits.

Basically mortgage interest is deductible for your primary residence and for one additional home such as a vacation home. For purchase money loans, mortgages originated for the purpose of buying a house, interest can be deducted on loans up to $1 million. For mortgages on your home other than for buying your home, such as home renovation, interest can be deducted on loans up to $100,000.

Equally important, real estate property taxes are also deductible and there is no limitation to the dollar amount. This again reduces your cost out-of-pocket regarding property taxes.

Another way to look at these deductions is simply that the government is helping you pay the mortgage and property taxes.

Casualty and theft losses are can also be deducted. For example, if your house was damaged by a storm or fire, you could deduct the losses on your tax return if you are not compensated by insurance. The loss however must be greater than 10% of your adjusted gross income. Again, contact a financial specialist or accountant for details.

A lot of people take advantage of the Business Use Of A Home Deduction. Today many people work from home or have home based businesses. If you are one of these you may qualify for the Business Use Of A Home Deduction. For all the details regarding the business use of a home, the IRS has prepared Publication 587.

If you qualify you may be able to deduct allowable expenses as well as write off depreciation for use of the portion of your home that you use for an office. But be aware that you will have to recapture the depreciation when you sell.

Some expenses you are not allowed to deduct are homeowners insurance, maintenance, repairs, or utilities.

This article is the first in a series explaining how your home can be a tax shelter reducing the real cost of home ownership. Watch for other articles in this series regarding tax-free sales and tax-fee borrowing. And remember always consult an accountant, attorney or financial adviser regarding your specific financial situation.

EasyPublish™ this article - publishers click here

More articles by Kate Ford

Free Report!
Ten Essential Secrets Of Article Marketing ... Grab Your Free
Copy Now:

Need Content?
Regular Top Quality Content for your Blog, Ezine or Website ...
Delivered Direct,
For Free!
Click For Details