This may be the time to consider buying a new home or refinancing a home you already own. Mortgage rates are low — interest rates on 15-year mortgages are under 3 percent and longer mortgages currently carry interest rates between 3 and 4 percent — and they are expected to remain low during recovery from the COVID-19 pandemic.
If you recently purchased a home: Congratulations! With it comes a lot of responsibility. But also, some tax benefits! Interest that you pay on your mortgage can be deductible, as can the real estate tax on the property, and if you pay it, private mortgage insurance. With the higher standard deduction, fewer taxpayers itemize, but I can help you maximize the tax benefits of owning your home.
The price that you paid for your house is your basis in the house. Certain home improvements may increase your basis. This becomes important when you sell your house. Track any expenses you incur for remodeling, landscaping, plumbing, heating/cooling, and window, siding and roof replacement to name a few.
If you have any questions about whether an improvement to your house adds to your basis, please call us.
If you’re selling your house at a profit, there are also tax benefits for you at the sale of your home. You can exclude up to $500,000 in gain on the sale of your home if you’re married. If you aren’t married, you can exclude up to $250,000. In order to exclude the gain, you must have owned your house at least two of the last five years, and you must have lived in your house for at least two of the last five years. These two do not need to be the same two years, although generally, they are. This gain exclusion can only be taken once every two years.