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What a great surprise... good news associated with the word
"taxes"!
Recent changes in the tax laws have made real estate a more
attractive investment than ever before. As a homeowner you
are eligible to take advantage of these tax changes and deductions
to keep more money in your pocket this year.
Congress did homeowners a great favor by passing the Taxpayer
Relief Act of 1997. Today, you can exclude up to $250,000
in profits (or $500,000 if you are married and filing a joint
return) from the sale of your primary residence from your
taxable income. In the past, this type of deduction only applied
to those who were age 55 or older.
Homeowners looking to downsize will benefit the most from
the tax change. You no longer have to reinvest the profits
in a home that is similar in price to avoid paying capital
gains tax, and you free up cash for additional investments
like rental property, mutual funds, education and more.
In most cases, the interest you pay on your primary mortgage
and your real estate taxes are fully deductible on your tax
return. Your lender will send you Form 1098, outlining the
amount you paid in interest and real estate taxes over the
course of the year.
Mortgage points are also deductible. If you bought a home
last year, you can deduct the full amount of the points you
paid as home mortgage interest. Meanwhile, if you sold a home
in 1998 and paid points, you cannot deduct them as interest
but you can claim them as a selling expense if your profit
is subject to a taxable gain.
As always, check with your accountant to review any deductions
you are claiming.
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