If you own a home, you are probably aware of the complexity that surrounds tax time. However, there are some benefits offered to homeowners, especially if your home was sold or you moved because of your career.Here are some ways being a home owner can be beneficial during tax time.
Most homeowners have a mortgage in which they make monthly payments to a lender. This payment contains two parts: principal and interest. The principal is a payment you make to lower your loan. The interest is charge you are paying the lender for giving you the loan. Homeowners receive a tax credit for the interest they paid on their mortgage. All the interest that was paid the year before can be used as a write off on your taxes.
When a home is sold, a tax break is also given. Anytime you make a profit off of something, you have to pay income tax on it. This includes your job, contracting and the sale of stocks. You are required to pay tax on the gain that you earned. There is a way out of paying this tax on selling a home.
You can avoid paying in if you are single and have occupied the home for a minimum of two of the past five years. As long as the profit is no more than $250,000. If you and a spouse file taxes together, you will not have to pay in if your gain is less than $500,000.
Depending on the state that you buy or sell your home, you could potentially receive a tax credit for your moving expenses if it is due to a change in career. Not all states offer this, so you will have to consult your tax representative. Also, you could possibly have to file a tax return in both states. That is why it is best to check with a CPA to know your tax responsibilities before the sell of your home occurs.