Be wary of the possible tax traps in a hot real estate market
If you sold your home: sellers can cash in one of the biggest perks in the tax code. Couples can sell their home for a $500,000 profit without paying a cent of income tax. Single taxpayers can pocket $250,000.
If you bought a home: A benefit of buying a home is that you generally can deduct the mountains of interest you pay. That probably means you’ll graduate into the class of taxpayers who can save more by itemizing mortgage interest, property taxes, certain loan costs and a raft of miscellaneous expenses rather than settling for the standard deduction every taxpayer is entitled to grab. But there is a limit to what you can write off. You can deduct interest on up to $1 million of so-called acquisition debt and up to $100,000 of home equity debt.
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