Tax Benefits of Owning Real Estate

Deductions on Mortgages and Property Taxes

If you own a property, regardless of how you acquired it, you can directly deduct the interest you pay on your mortgages to up to $1 million on both first hand and second hand mortgages. In addition, if you still have home equity debt, you can get deductions for up to $100,000 or whatever is the difference between your home’s value in reference to the current state of the housing market and the amount you still owe on your mortgage.

The property taxes are deductible too if you did energy saving renovations on your property like insulation; and if it contains any of these add-ons streets, sidewalks, and water or sewer systems.

Tax Credits on Energy Saving Renovations

Depending on the ruling in your state, tax credits are also available for energy-saving renovations. Such renovations include insulation that complies with the standards set by your local energy board and the use of non-renewable sources of energy like solar-powered heating systems. In order to be eligible for such tax credits, you will need to have your home assessed prior to the submission of the correct tax form.

Exemptions from Paying Capital Gains

When you sale your primary residence, you can make up to $250,000 in profit if you're a single owner, twice that if you're married, and not owe any capital gains taxes.

Even better, there's no limit on the number of times you can use the home-sale exemption. In most cases, you can make tax-free profits of $250,000 (or $500,000 depending on your filing status) every time you sell a home.

Further, one of provisions of the tax code also dictates that you may be saved from incurring capital gains if you exchange your property with another piece of land. These deductions help lighten your monthly expenses on mortgage, insurance and utility bills. And if you’re using your real estate property for rental use, you will also have additional earnings through your rental income. Which, can be an excellent return on your investment!