10 Great Tax Deductions When Buying/Selling A House

I am often asked if a Buyer/Seller can claim certain “things” on their taxes. So I have decided to write down my 10 favorite tax deductions that you can claim when you buy or sell your primary residence. Note, I said primary residence not investment property, some of these MAY BE applicable for investment properties and some MAY NOT.  I have written numerous previous blogs on investment tax deductions for investment properties including the 1031 tax-deferred exchange. Please check them if you have further questions. Also, please note that I am NOT an accountant and this information should be verified by your personal CPA if you need to use any of these strategies in your State.

Visit the Internal Revenue Service’s (IRS) website for more details on each item.

1.  Mortgage Loan Interest: The primary tax deduction due to the fact that interest payments comprises a large portion of your mortgage payment in the early years of the loan’s term. 
2.  Home Equity Line Of Credit (HELOC): The interest on a home improvement loan is also deductible, but must be calculated differently than the interest from your primary mortgage loan.
3. Points: One point is one percent of the loan principal you acquired for the purchase of your home. Any/all points charged by lenders as part of the cost of the loan can fully be deducted on your taxes; as well as, discount points charged by your lender. However, the commission you paid your mortgage broker is NOT a deductible item.
4. Property Taxes: The Property tax that you have actually paid is deductible from your taxes.  Property taxes that are due but unpaid or delinquent due to non-payment are of course not a deduction. 
5. Capital Gains Exclusion. The Taxpayer Relief Act of 1997 which allows married taxpayers who file jointly to keep, tax free, the capital gains on the first $500,000 on the sale of their residence; similarly, single tax payers get the same benefit on the first $250,000 of capital gains. The other stipulation is that you must reside in the property 24 out of 60 months, although not consecutively to earn these capital gains deduction.
6. Home-Based Business Deduction: Home offices that use a portion of your home exclusively for business could qualify you to deduct a percentage of costs related to that portion.
7. Selling Costs and Capital Improvements: When you sell your home, you can reduce your taxable capital gain by the amount of your selling costs, which include real estate commissions, title insurance, legal fees, advertising and inspection fees and any other fee that is required to “get” to the sale (i.e., contribution to the Seller, etc.).
8. Moving Costs: A move triggered by a new job comes can come some deductible moving costs.
9. Mortgage Tax Credit: Mortgage Credit Certificates (MCCs) allow qualifying low-income, first-time home buyers to take a mortgage interest tax credit of up to 20 percent (the amount varies by jurisdiction) of the mortgage interest payments made on a home.
10. Energy Tax Credits: There are numerous energy tax credits available on all kinds of home improvement items. New windows, a new furnace, water heaters are just a few items that may allow you to claim a certain percentage of the purchase price as a deduction on your taxes. New “green” products can also be a great deduction via Government mandates, energy savings while adding peace of mind to your Buyers as well.

These are but a few ways to lower your tax burden during your sale or purchase a new property. Please check with your CPA prior to applying any of these strategies blindly across the board.