Financial Benefits of Home Ownership

For most individuals owning one's personal residence presents the greatest tax benefits and accumulation of personal wealth. Starting with the purchase of your first home, right to the sale of your last, Congress has seen fit to allow tax benefits to homeowners. You as an intelligent home buyer or seller should be familiar with some of the tax benefits and requirements that may effect you as a homeowner. Remember, however, that the tax law provisions are quite expansive and involve more than could be covered in this summary. Professional tax planning assistance is, therefore, essential. Our tax professionals can supply the tax advice and planning strategies you require to best take advantage of the provisions.

Purchasing your Principle Residence Entitles You to Deduct on Your Tax Return, Within Certain Limits

Loan fees or "points" paid to obtain financing.

Interest paid on the financing.

Property taxes paid.

Exclusion of Gain on Residence Sale - Under the 1997 Tax Law, a taxpayer may exclude up to $250,000 ($500,000 for married persons filing jointly) of gain realized on the sale or exchange of a principle residence, generally effective for sales or exchanges occurring on or after May 7,1997. The exclusion is allowable each time a taxpayer sells a principle residence, but generally not more often than once every two years. Gain would be recognized, however, to the extent of any depreciation allowable with regard to the rental or business use of a principle residence after May 6, 1997.

To be eligible for the exclusion, a taxpayer must have owned the residence and used it as a principle residence for at least two of the five years prior to the sale. If a taxpayer fails to meet these requirements (or the once-every-two-years rule) due to a change in employment, health problems, or other unforeseen circumstances, he/she may exclude the portion of the $250,000/$500,000 exclusion equal to the fraction of the two years that the requirements were met.