Credit Card Debt Consolidators When No One with YOU
WE are THERE !

Debt Consolidators
tax implications of buying a home
Debt Consolidation  Credit Counseling  Debt Management  Student Loan  Medical Debt  Payday Loan

Free Financial Softwares

Get Free Quote Online
click here to Apply

The Tax Implications of Buying Your Home

As you've figured out, owning a home is an expensive proposal. Luckily there's a some hope to save $$$ i.e. a Tax Deduction & it's major source.

When you file your federal and state income tax forms, you'll be able to deduct mortgage interest and property taxes (assuming that your loan is for $1 million or less). And there's even a deduction for up to $100,000 for a home equity loan.

So how much is this really going to save you?

Let's say that you're in the 28% tax bracket. Let's also say that, once you get your loan, you end up paying $1,000 a month. The interest portion of that $1,000 is tax-deductible -- and, in the early years of repaying the loan, almost all of it is interest. This means (assuming that you have other deductions at least equal to the standard deduction) that it will lower the amount of money on which you pay taxes. And this, of course, means that your tax bill will be significantly lower -- so you'll effectively end up having paid something like $720 a month for that loan. ($1,000 minus 28%, or $280.)

This is not to say that the reason to buy a house is to save taxes, but it sure is a nice perk. And the place you live will belong to you, not some landlord who doesn't know your name, won't fix plumbing problems, doesn't like you knocking holes in the wa ll to hang paintings, and threatens to call the police when you try to sneak a waterbed up the back stairway.

One caveat -- be sure to check with your accountant to make sure that you're going to be able to get the tax savings you expect. The likelihood is that you will, but you don't want to count on this kind of savings and then discover that for some reason you've miscalculated.

A deduction is an expense that can be subtracted from your taxable income for the year. For example, if you earned $120,000 in 2006 and had $20,000 worth of deductions, your taxable income would be reduced to $100,000 - thereby reducing your income tax bill for the year.

Unlike ordinary income, which is taxed the year it is earned, capital gains may stretch over many years. You don't pay tax on a capital gain until you sell your home and realize the gain.

which of the costs are tax deductions and which only affect your capital gains

Tax Dedcutibles costs :- Points and any other loan fees based on the amount of the loan, such as a loan origination fee, are fully tax deductible for purchase loans for the tax year in which they are incurred. So you deduct any loan fees you paid last year. But the tax deduction rules are different for refinances than purchases. Any loan fees paid to refinance the mortgage on your home must be amortized over the life of the loan. For example, if you paid one point ($6,000) for a $600,000, 30-year fixed-rate loan, you must amortize that fee over 30 years.

That means you can deduct only 1/30th of the fee ($200) each year. If you pay the loan off early, as most people do by selling or refinancing, you can deduct the remaining balance of the points and loan fees not yet amortized.

Nod Dedcutibles costs :- Real estate brokerage fees are not tax deductible. However, they reduce your costs basis for purposes of calculating your capital gain when you sell a home.

For example, if you paid $18,000 in real estate commissions to sell a $300,000 home, you add that figure to the amount of money you paid to buy the home in order to calculate your taxable gain (profit) when you sell your home. Under tax law, you can exclude up to $250,000 in home sale profits ($500,000 for a married couple filing jointly) from capital gains tax, so for most people this is no longer an issue.

But if you are fortunate enough to buy a home that increases more than $500,000 in value before you sell it, you can deduct costs such as real estate sales commissions from your taxable gain.

Reduce your cost :- Legal fees and any other costs incurred in the sale of your home also reduce your cost basis for purposes of calculating your capital gain. So keep track of them when you sell.

Sign Up
How We Works
Our Company
Contact Us

Lower monthly payments
up to 57%

Reduce interest charges
Consolidate your debts
into one easy payment

Pay off your debt faster
Simplify your life
worry less about money

Sign Up Requirements
Minimum $2,500
in unsecured debt.

2 or more accounts.
A source of income.


Guide : Other Services   • Articles   • Latest Debt News   • Current Financial Stories
Misc : Debt, Mortgage & Loan Calculators    FAQ Related to:- Debt Collection, Mortgage, Loan, and Equity & More   • Site Map
Privacy    License    Testimonials    Feedback Form

© & ® 2004-2009 - Debt Consolidation Services