Tax benefits of homeownership

Being a homeowner requires responsibility. Owning a home involves maintenance and repairs, tons of yard work, insurance, and of course, figuring out your taxes. With tax season in full swing now is a good time to review what tax benefits are available to homeowners.

“The tax benefits that come along with being a homeowner are a welcome relief, especially now when many families are struggling financially and the economy is still recovering,” explains Steve Merchant, Orlando Regional Realtor Association chairman of the board with Global Realty International. “Owning a home is one of the best ways to build financial security over the long term, providing both equity accumulation and tax benefits over time.”

One of the most notable tax benefits associated with homeownership is the mortgage interest deduction (MID). The MID allows homeowners to deduct the interest paid on a mortgage debt of up to $1 million on a primary residence and one additional residence.

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Another tax benefit allows sellers to exclude certain capital gains from the sale of a principle residence. Couples who file a joint federal return can exclude from taxation up to $500,000 of any gain in their home’s value. Singles can exclude gains of up to $250,000.

Finally, there’s the American Taxpayer Relief Act of 2012, which extends two important tax incentives for homeowners. One is the deduction for mortgage insurance premiums. Homeowners with incomes of no more than $100,000 can deduct their mortgage insurance premiums if they were required to obtain insurance as a condition of receiving financing for the home. The other provision is a credit of up to $500 for making certain improvements that increase a home’s energy efficiency. The tax credit includes costs related to buying and installing certain products such as a new water heater, central air conditioner, insulation, windows or roof.

“Homeownership is an investment in your future,” Merchant says. “It provides social benefits, strengthens communities and offers homeowners financial stability. These tax breaks are just one of many benefits to being a homeowner.”