Tax Advantages Of New Home Ownership 
It has long been known that buying a new home is one of the smartest purchases you can ever make. Home ownership has many positive tax advantages for most buyers. Three of the most important sources of tax savings for home buyers are the:
- Deductions for mortgage interest
- Deductions for real estate taxes
- Capital gains exclusion on the sale of a principal residence
Deductions for mortgage interest and real estate taxes can reduce the cost of home ownership by reducing your tax liability each year. So a home owner with $10,000 in annual mortgage interest and real estate tax payments who falls in the 25 percent tax bracket could potentially realize up to $2,500 in tax savings annually. A home owner who itemizes their taxes could deduct from their taxable income the interest on up to $1 million of mortgage debt and $100,000 of home equity loans for a first or second home. In addition, most state and local taxes you pay on your home are also deductible.
What Owning A New Home Can Mean For You
When you sell your home, the capital gains exclusion can provide a home owner a substantial tax saving benefit. Currently the law allows sellers of a principal residence to exclude from taxation profits from the sale of a home, up to $500,000 for a married couple and $250,000 for a single taxpayer. With capital gain tax rates in the 15 to 20 percent range, this tax saving advantage can be very substantial.
In fact, according to economists at the National Association Of Home Builders a married couple with an $80,000 income and a $250,000, mortgage are estimated to save more than $11,000 in the first five years of homeownership from just the tax savings from the mortgage interest and real estate tax deductions. If that couple owns that same home for just twelve years those savings grow to more than $25,000. That means that the savings combined with the exclusions on capital gains, the total tax savings for the entire period of ownership could exceed $52,000!
Similarly, a couple with an income of $60,000 and a $180,000 mortgage, the total tax savings over five years is more than $6,000 and the savings over twelve years is estimated at more than $33,000!
New Programs Mean More Savings
When you combine the home buyer tax credits available for homes purchased by April 30, 2010 - up to $8,000 for first-time buyers and $6,500 for repeat buyers - the tax savings from home ownership can make buying a new home today a rewarding financial decision.
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