The New Owner Of The House Comes Into The 25% Tax Bracket

Category: Finance, Real Estate.

Deductions in the property taxes that are paid on an individuals personal primary house and mortgage interest are one of the best tax breaks that have been provided by the US Tax Code.

If you are buying a house for the first time with the purpose of occupying it, it can mean thousands of dollars in tax savings. More than 66% of Americans are taking advantage of the benefits that this tax break offers. For instance, residents of a particular community earn more than 100, 000 dollars per year. The new owner of the house comes into the 25% tax bracket. Now assume that a homebuyer will purchase a typical house in that area within the community at a purchase price of 600, 000 dollars and finance the purchase with a conventional 30 years fixed rate loan, with an interest rate of 25% . He or she will have a tax deduction on an annual basis on the mortgage interest of around 30, 000 dollars per year and annual property tax deduction of 7, 500 dollars!

Besides the annual tax breaks there is another additional tax break that is being offered to homeowners when they decide to sell the house. In this way, the new owner can save approximately 9, 375 dollars in a year. If you want to, you can avoid the taxes on the profit that you will be making but this will depend a lot on your circumstances. Some changes were brought in to the law in 1997 so that approximately 250, 000 dollars in sales profit or gain is made free from taxes, if the homeowner owned the property for at least two years and stayed in it for more than 2 years before the house is sold. Few years back in order to avoid the tax payment on the sale of a house, the homeowners used the sale proceeds for buying another house. If you have not lived in your property for 2 to 5 years even though you own the house, you do not qualify for this benefit.

If the sale takes place due to some changes in the health of the owner, the IRS can, employment or otherwise provide some tax relief and in this situation the tax- free gain amount would be prorated. If you sell your house before you meet the ownership and requirements of residence, you owe the government tax on any profit that you will be making. There was a ruling by the IRS in 2002 by which more dollars can be added into the pocket of the homeowners when they sell before they qualify for the full tax break. These circumstances include divorce, legal separations, death, and loss of job or any change in employment. Some unforeseen circumstances have also been defined by the Treasury under which the homeowners can get some relief from taxes. You should seek good advice on tax matters from any tax professional before buying because this will make a lot of difference in decision related to the kind of property you should, invest in.

Read more...

Existing Homes Can T Measure Up - Finance and Real Estate Articles:

The benefits of building your new home in Daytona Beach are numerous. From fine dining to casual waterfront cuisine, flea markets to high- end boutiques, Daytona Beach has, LPGA to NASCAR something for everyone.

PROPERTY MANAGEMENT COSTS - Marina Klingman's Finance and Real Estate blog:

People talk about running the numbers before buying an investment property, but before doing that we need to discover what are the numbers and how do you get accurate numbers.

French Place Residents Are Content In Their Zip Code - Brenda Stauffer's Finance and Real Estate blog:

Once considered poorly placed due to its proximity to IH- 35, Austinites have recently discovered the potential of this genial neighborhood. French Place sits serenely on the northeastern edge of downtown, a colorful collection of one- story homes, many of which have a two bedroom, one bathroom layout.