Spring and Summer are the busiest times for buying and selling homes. Mortgage rates are still attractive, so now may be the time to buy. For those who are buying homes, there are new mortgage interest limitations of which you should be aware.
Interest on a mortgage used to purchase a principal residence is only deductible when obtained for the purchase of the property and secured by the principal residence. It is also limited to mortgages up to $750,000. There is still a deduction for real property taxes, but this is capped at $10,000 between all state and local taxes paid.
For those who are selling homes, you can exclude up to $250,000 ($500,000 for married filing jointly) of gain on the sale of the home if you meet the requirements. To qualify, you must have owned and used the property as a principal residence for at least two of the past five years ending on the sale date. Make sure you keep track of your basis to minimize any gain. Your basis would be your original purchase price plus the cost of any improvements less any depreciation taken for any business use (rental or home office). We advise clients to keep all records of home purchases and improvements for seven years after the final sale of the home.
Your home is probably one of your largest investments, so please let us know if we can help you plan and understand any tax implications of buying, selling or owning your home.