Tax Advantages of Owning Real Estate
Perhaps the greatest advantage of owing real estate property is the right to deduct interest paid on a home mortgage and a home equity loan. In order for this to happen you must qualify for an income take deduction by having acquisition indebtedness, which is incurred by acquiring, constructing or improving a qualified residence secured by the residence and limited to a $1,100,000 aggregate loan. You may also qualify through "home equity indebtedness", which is secured by a qualified residence to the extent that the loan amount does not exceed the fair market value of the qualified residence reduced by the amount of the acquisition debt. Qualified residence is your principal residence and another residence like a vacation home that is not rented to anyone else.
The interest paid on the mortgage of your home, vacation home and a home equity loan can be deducted from your income if you complete a Schedule A (itemized deductions) form and attach it to your 1040 Federal Income Tax Return. Many states also allow you to take a deduction from your taxable income for the interest you paid on your home, vacation home and qualified home equity loans. The interest that you pay on a mortgage for your home, your vacation home, and for a home equity loan can be deducted from your income. In order to take the deduction, Schedule A (Itemized Deductions) must be completed and attached to your 1040 Federal Income Tax Return. Many states likewise enable you to take a deduction from your taxable income for interest paid on your home, qualified vacation home and qualified home equity loans.
You can also deduct real estate taxes on your federal return. These include any state, local or foreign taxes on property levied for the general public welfare and must be based on the assessed value of the property and charged against all property under the jurisdiction of the taxing authority. This generally does not include taxes charged for local benefits, trash and garbage pickup fees, transfer taxes, homeowners' association charges or rent increase to higher real estate taxes.
ABOUT THE AUTHOR:
Richard sells real estate in the San Gabriel Valley which is about 12 miles South of Los Angeles. For more information, visit his website at http://www.westsangabrielvalleyrealestate.com
