Tax Benefits For Joint Home Loan Owners
If you get a joint home loan with your spouse or partner, you should know about the tax benefits available to you when deciding how to repay the mortgage.
The article will describe those tax benefits and how they can help the homeowner. It will also talk about what the IRS considers “joint ownership.”
This article will be helpful for people who are looking at buying VA homes for sale but might not know about these facts.
Below are the tax benefits;
1. Mortgage Interest Tax Deduction
As stated, it is a tax deduction. It allows you to deduct the interest amount paid on your mortgage; this amount can be used as a deduction against your income. The maximum you can write off is $1,000,000 of mortgage interest paid.
This is a big benefit. If your income is $250,000, you will be deducted $250,000 of interest paid on your mortgage. This deduction can save a homeowner up to $30,000 in taxes for the year. If a homeowner has been paying their mortgage for more than five years, this percentage increases to the point where it equals 100%. You should take out a home loan at lower interest rates as they are more tax effective.
2. Personal Property Tax Deduction
The homeowner can deduct any property taxes paid on their personal property. This includes washing machines, dryers, etc., which are not located in the home but are used there regularly and belong to the homeowner. Remember that this deduction only applies if you itemized your past deductions; otherwise, it will not apply to you.
3. Tax-Free 1031 Exchange
Tax-free exchanges include property, cash, and other property. The exchange must occur between the investor and the seller or their agent (who is specially authorized). This helps the investor avoid capital gains on assets and income tax on profit made from a sale. The only thing the investor will have to pay is the closing cost, but this can be negotiated when discussing with a realtor.
Tax-free exchanges are a great way to make money on the sale of an investment property. It is also a great way to buy and sell a property without worrying about any capital gains.
4. Capital Gain Tax Exemption
This is a huge benefit. If you sell your primary residence after five years of holding it, you are exempt from paying capital gains tax on the profit. You are not required to pay any taxes on the profits. This also means you cannot be taxed twice on your profit.
5. Tax-Free Retirement Accounts Contributions
You can contribute up to $17,000 per year into a 401K or another employer-sponsored retirement plan (IRAs) if you are an employee. If you are self-employed, you can put an extra amount into the plan. You can have up to $51,000 in an IRA and still not be taxed.
If Social Security covers a spouse, they will have additional contributions put into their 401K. It should be noted that the spouse also has to be at least 59 ½ with earned income.
6. Tax-Free Profit on the Sale of a House
If you sell your house, you can tap into the profits without having to pay capital gains tax. However, some rules apply. To be eligible for this exemption, you must have owned and used the house for at least two years. Also, you must be a resident or citizen of the US and use the house as your primary residence.
Also, if you are married and filing taxes jointly, your spouse must have lived in the house for at least two years. You have to use the profits from the sale to buy or build a new principal residence. If you use it for anything else, it is considered as gain and will be taxed at your current income tax rate.
Also, if there is more than $500,000 profit from your primary residence’s sale, you will not be able to deduct things like closing costs, commissions paid on the sale, etc.
Buying a home is a big investment. Many homeowners are unaware that they can receive money back from the government on their tax returns. There are multiple tax benefits that most homeowners aren’t aware of but could save them thousands of dollars in taxes each year.