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Key tax Homeowner benefits

Updated Today
Hi, this is LutherTheRealtor sharing with you everything you need to increase, maintain and protect the value of your home.
So there was some tax changes with the whole physical cliff Deal but before I mention that I want to talk about 3 key things that didn't change which really helps homeowners build wealth.
  1. Mortgage interest deduction.
  2. Capital gain exclusion
  3. Property tax reduction
The mortgage interest deduction is pretty simple, it says that homeowners can deduct the interest paid on mortgage debt up to 1,000,000 dollars. You can claim it if you itemize and your first loan is the only loan that qualifies. In many cases you can also deduct interest on home equity loan, second mortgages, home equity line of credit. Now your lender will send you a statement with the amount of annual interest you pay on your loan and that's how you know what to deduct.

Capital gain exclusion means the vast majority of homeowner don't have to pay capital gains tax on the profit when they sell a home. So couples who files a joint federal tax return can exclude from taxation up to 500,000 dollars of the profit and singles can exclude gain up to 250,000 dollars. The exception is home sellers who's income is 450,000 dollars annually adjusted gross income or above.  Singles earning $400,000 or more and who net more than $500,000 on a sale of they're home.  They would have to pay gains taxes on the profit.

Lastly your property tax are deductible but remember some taxing authorities work a year behind. That is your not billed for your 2012 taxes until 2013. So you want to enter on your federal forms whatever amount you actually paid in 2012 no matter what the date is on your tax bill.


There are three tax bills that were extended with the tax deal by Congress and the President at the beginning of the month that are particularly nice for homeowners.
  1. Private mortgage insurance deductions.
  2. Energy tax credit.
  3. Mortgage Debt Forgiveness.
The Fed extended the private mortgage insurance deduction until the end of 2013 which expired in 2011. Now PMI is what you pay your lender each month if you put down less than 20 percent on a home when you go to buy it. It protects the lender if you default on the home loan. If you itemize you can deduct each years premium paid on mortgage insurance for your principal residence and for a non rental second home. The deductions begin to phase out once your adjusted gross income reaches $100,000, 50,000 dollars for married filing separately. And disappears entirely for AG I of 109,000 dollars or $54,500 for married filing separately.

On energy tax credit, if you have made an eligible energy efficient improvement in 2012 like for example installing efficient H VAC or adding some installation you can potentially claim up to 500 dollars depending on the project. This tax credit expire at the end of 2011 but Congress made it retroactive to 2012 an extended it to December 31st 2013. By the way that 500 is a lifetime credit, so if you already took it 2010 or 2011 I'm sorry but you're done.

Mortgage Forgiveness Debt Relief Act was sent to expire last year but Congress extend it for 1 year. So if homeowner or sellers have a portion of their mortgage debt forgiven by their lender typically in a short sale or foreclosure sale for sellers and in a modification for owners they don't have to pay taxes on that amount. Some people call that phantom income. Without the extension any debt forgiven would be taxable. Which for underwater household represents a real financial burden.

Alright that's it, big tax news this year and for more information as always
Call me any time 941-735-6856 or LutherTheRealtor.com