Tax time is right around the corner and you know what that means… Time to file that first extension! [Extension Form]
I also wanted to give you a heads up on a few things in relation to taxes and your home or investment property – Owning a home gives you access to all kinds of great deductions, deferrals, and exemptions. Please see a CPA to learn how these concepts apply to your situation as I am not giving any tax advice in this article.
The first big deduction is your home mortgage interest deduction – this is one of the big reasons given to own over renting. Also, recently they made a change and MI (Mortgage Insurance) is sometime deductable as well. [Home Mortgage Interest Deduction Form]
One of my favorites is depreciation of investment property, this means you get to tell the government that you are losing money due to a building getting older when in most cases its actually getting more valuable. This one can be particularly tricky and if you’re have trouble sleeping you can read all about it here: [Depreciation Info]
Probably the biggest tax break you will ever get is the exemption of capital gains on the sale of your primary residence. Basically, if you lived in your home for 2 of the last five years you get off the hook for capital gains up to $250k if single or $500k if married. Learn more in 36 riveting pages: [Selling Your Home Tax Info]
And last but not least are tax deffered exchanges of business and investment property know as a 1031 exchange. This allows you to sell an investment property and then put all the money and debt (or more) into another like-kind property (real estate in the USA used for investment or buisness) and defer the capital gains until a later date. Interesting factoid: the 1031, also know as a Starker Exchange was changed from a simultaneous event to one in which you have time to find replacement property by an Oregonian named TJ Starker[IRS Section 1031]