As the deadline to file taxes quickly approaches the Arkansas Realtors® Association reminds home owners of the many tax benefits they can take advantage of by owning a home.
“Many families are feeling a financial squeeze these days and the tax benefits associated with owning a home can be a welcome relief,” said Andy Meyers, President of the Arkansas Realtors® Association. “There are many benefits to being a home owner, but some of the most substantial advantages are most apparent at tax time.”
Tax credits and deductions for home owners include the mortgage interest deduction, capital gains on home sales, and credits for certain energy-efficient home improvements. The MID allows home owners to deduct the interest paid on a mortgage debt of up to $1 million on a primary residence and one additional residence.
“Some suggest that many of today’s tax incentives for home owners primarily benefit the wealthy, but that is untrue,” said Meyers. “Ninety-one percent of home owners who claim the MID earn less than $200,000 a year.”
According to the ARA, a family who bought a home in 2010 with a $200,000, 30-year, fixed-rate mortgage, assuming an interest rate of 4.5 percent, could save nearly $3,500 in federal taxes when they file this year.
Federal law also allows sellers to exclude certain capital gains from the sale of a principal residence. Couples who file a joint federal return can exclude from taxation up to $500,000 of any gain in their home’s value. Singles can exclude gains of up to $250,000.
There are countless tax benefits available to home owners who have recently installed energy-efficient improvements, as well. The American Recovery and Reinvestment Act of 2009 created energy tax credits for installing insulation, energy-efficient exterior windows or doors, heat pumps, furnaces, central air conditioners, or water pumps. A 30 percent credit is also available to home owners who installed alternative energy equipment such as fuel cells, solar water heaters, solar electric equipment, small wind energy projects, or geothermal heat pumps.
“For people who don’t have hundreds of thousands of dollars in savings to buy a home outright, these tax benefits can help them begin building their future through home ownership,” said Meyers. “Realtors® continue to work tirelessly to defend these tax benefits on Capitol Hill and ensure public policies that promote responsible, sustainable home ownership.”
House to House is written by Amy Glover Bryant and distributed weekly by the Arkansas Realtors® Association.