The Perks of Real Estate Ownership at Tax Time

It's that time of year again, tax season. Homeowners across the nation prepare to navigate the labyrinth of tax codes, deductions, and credits. Amidst this annual financial rendezvous, real estate ownership stands out as a beacon of tax-saving opportunities, offering potential benefits that can mitigate the tax burden and amplify financial well-being. One important point to note is that one should always consult with their tax professional about how their specific situation of home ownership may impact their tax filing.

At the heart of real estate’s appeal as a tax shelter lies the principle of mortgage interest deduction. Homeowners, reviewing their monthly mortgage statement, can often deduct the interest paid on their home loan, reducing their taxable income. This may apply to a primary residence and a second residence. However, there are limitations on how much can be deducted, also the use of the financing can play a role in what interest can be deducted. This provision, a cornerstone of the tax code, not only eases the financial load of owning a home but also incentivizes prospective buyers to step into the realm of homeownership.
Diving deeper into the tax-savings arsenal, property taxes emerge as another ally for homeowners. Deducting local property taxes provides a reprieve to those grappling with the rising costs of property ownership. This deduction acts as a financial cushion, softening the blow of tax bills and reflecting the government's acknowledgment of the homeowner's contribution to the community’s fiscal health.

The narrative of real estate's tax advantages extends to the realm of rental properties as well, where owners of rental properties find the ability to deduct many of the expenses associated with the maintenance and management of their investment. From repairs and upgrades to insurance and management fees, these deductions align the interests of property investors while promoting rental market stability and growth.

Capital gains exclusions further sweeten the deal for those looking to sell their primary residence. With the ability to exclude up to $250,000 ($500,000 for married couples) of the profit from capital gains tax, homeowners are encouraged to invest in their properties, enhancing their value while nurturing the dream of homeownership and financial prosperity.

In the wake of the remote work movement, the use of home office deductions has opened new avenues for taxpayers to assist with their tax liabilities. Homeowners who designate a portion of their dwelling for business purposes may be able to claim deductions for related expenses, blending the personal and professional spheres to create a tax-efficient living and working environment.

These are some examples of how one can benefit from ownership of real estate. However, amidst these financial perks, homeowners must tread the path of tax filing with diligence and foresight. For all these examples, one should always check with their tax professional who understands the intricacies of tax laws, staying abreast of annual changes, and can ensure that the benefits of real estate ownership are fully realized without falling into the pitfalls of non-compliance or missed opportunities.

RICH FLANERY IS A CERTIFIED MORTGAGE PLANNING SPECIALIST AND AN INVESTMENT ADVISER REPRESENTATIVE. BRANCH LOCATION 600 S. SAINT VRAIN AVE #4, ESTES PARK, CO 80517. WWW.PEAKCAPITALMORTGAGE.COM PEAK CAPITAL MORTGAGE, LLC, 1045767 & 2347925, RICH FLANERY, 256117, PEAK CAPITAL MORTGAGE, LLC, CO-2347925, PEAK CAPITAL MORTGAGE, LLC, (970) 577-9200, CO-256117, WY-256117, WY-2347925 PEAK CAPITAL MORTGAGE, LLC, 970-577-9200, FL-2347925 FL-256117 SUBJECT TO BORROWER APPROVAL