At tax-time, reviewing tax rules as it applies to home owner ship is worth looking at again. “Under the Internal Revenue Code, mortgage interest is deductible from income but not to the extent that it is attributable to an outstanding mortgage principal balance of more the $1 million,” said Tom Kelly, in his Sunday Miami Herald article. “Similarly, interest payable on a home equity line of credit that is used to finance home improvements is deductible, but not to the extent that is it attributable to an outstanding loan balance of more than $100,000,” Kelly added. It is important to remember that the $1 million and $100,000 caps are applied per residence, not per taxpayer.
The Taxpayer Relief Act “replaced the “rollover” provision and $125,000 over-55 exclusion,” he continued. Today, a taxpayer can qualify for a tax exclusion of $250,000 ($500,000 for married couples) provided they have owned and used the property as a principal residence for two out of the five years prior to the date of sale. The limit on the number of times a taxpayer can claim this exclusion is once in any two-year period. As always, speak to your accountant for professional tax advise as it applies to your real estate transactions.
Know the market, call Sheryl DiCarlo, 305.332.3256 before your next real estate move.