- The IRS says you can deduct interest in the year that it is paid, and that is usually part of each monthly loan payment.
Mortgage interest - In general, you can deduct interest charged on a loan used to acquire or improve your principal residence in the year that it is paid.
The sale - Because your home is considered a capitol gain, there is no tax on the sale of your home.. (up to $500k for married, $250k for single)
If you have a gain from the sale or exchange of your main home in 2003, you may be able to exclude from income up to $250,000 of the gain ($500,000, for certain married taxpayers filing a joint return). The exclusion may be allowed each time you sell or exchange your main home, but generally no more frequently than once every two years. You cannot deduct a loss from the sale of your main home.
If you sold your home under a contract that provides for part or all of the selling price to be paid in a later year, you made an "installment sale." Refer to Topic 705 for more information.
To be eligible for an exclusion, your home must have been owned by you and used as your main home for a period of at least two years out of the five years prior to its sale or exchange. You can meet the ownership and the use tests during different two year periods. However, both tests must be met during the five-year period ending on the date of the sale or exchange. If you and your spouse file a joint return for the year of the sale or exchange, you can exclude up to $250,000 of gain if only one of you qualified for the exclusion.
If you did not meet the ownership and use tests or if during the 2-year period ending on the date of the sale or exchange you sold or exchanged another home at a gain and excluded all or part of that gain, you may be allowed to exclude a portion of the gain realized on the sale or exchange of your home if:
You sold or exchanged your home due to a change in health or place of employment or due to unforeseen circumstances
A qualified real estate professional can give you more details on other tax benefits and liabilities! Consult a professional for more information about the tax benefits of owning a home!
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