Homeownership can provide some amazing tax benefits! The IRS enables you to deduct the interest on a first-time home purchase or home equity loan in the year the loan is made. Another way to save is to consolidate debt via a home equity loan because interest from a home equity loan is tax deductible, but interest paid on credit card debt is not. You can also deduct the interest on any purchase or improvement for your first or second home from your tax return. The IRS allows you to deduct the interest paid on mortgage debt up to $1 million, provided that your home is the collateral used to secure the loan.
Property taxes are offer yet another upside at tax time – you can deduct state and local property taxes from your federal return in the year that they were paid. If you bought a home in California in 2006 at the-then median price of $556,650, your property taxes would be approximately $5,570 for the year, and are fully deductible. Property taxes are increased on an annual basis, and as your property tax goes up, so does the amount you can deduct each year.
The return on yOur investment when you sell is also protected. You are able to keep up to $250,000 for an individual or up to $500,000 for a couple in profit tax free when you sell your home. No other investment allows you that kind of tax shelter.
And keep in mind, one more bonus that isn’t tax related is that you are no longer paying rent to someone else! Instead, you are paying yourself! A home can allow you to build yourself up financially, and in San Francisco, your investment is safe from the fluctuations that have occurred as housing bubbles “burst” all over the country.
To learn more about how purchasing San Francisco Real Estate can provide you with great tax advantages, consult a tax professional. If you don’t have one you trust, call or email me, and I can refer you to a tax professional that can help.