If you’re a homeowner, there are many tax loopholes that can help your home make money for you:
If you’ve lived in your home for two years, you can take a tax-free gain of $250K for a single filer and $500K for married (filing jointly). You just have to have used the property as your principal residence for two of the past five years. You can even rent your house out for most of that period and still qualify for the full gain!
If you’ve lived in your home for less than two years, you can still take a “reduced exclusion amount” (pro-rated from the full amount according to how long you’ve lived there) if you’re “forced” to move because of “unforeseen circumstances” – which can simply mean that you’ve started (or ended) a home-based business.
If you’ve lived in your home more than two years, you can always re-finance it to remove the value. Of course, this assumes that there is significant value in your home with the current market conditions. If the current market interest rates are higher than your existing loan, for instance, get a home equity loan instead. A general rule of thumb is once your gain approaches $250K if you’re single (or $500K if married), it’s time to move.
If you decide to rent out a room in your house, you’ve created a home business from which you can deduct relevant expenses against the rental income, as well as the depreciation of the space. And when you sell the house, you can exclude the gain on the pro-rated portion.
If your income grows so high that you begin to lose itemized deductions, you can always move the mortgage interest deduction off Schedule A by using the home office deduction, which allows you to deduct a pro-rated portion of the mortgage interest and property tax on a separate schedule.
If you wish to take out a home equity loan that’s fully deductible, simply demonstrate that the additional debt above the amount allowable was used for business or investment purposes – such as buying in to an apartment building.
Please note that this Scottsdale Real Estate Blog is for informational purposes and not intended to take the place of a licensed Scottsdale Real Estate Agent. The Szabo Group offers first class real estate services to clients in the Scottsdale Greater Phoenix Metropolitan Area in the buying and selling of the best Luxury homes in Arizona. Award winning Realtors and Re/MAX top producers and best real estate agent for Luxury Homes in Scottsdale, The Szabo group delivers experience, knowledge, dedication and proven results. Contact Joe Szabo at 480.688.2020, info@ScottsdaleRealEstateTeam.com or visit www.scottsdalerealestateteam.com to find out more about Scottsdale Homes forSale and Estates forSale inScottsdale and to search the Scottsdale MLS for Scottsdale Home Listings.