Shedding Light on Tax Shelters
Besides exclusions that apply to selling a house, simply owning a home might be the best tax shelter available, states John Blake, CPA and manager, Klatzkin & Company of Trenton. “You start saving money as soon as you close on the house, and you can take a tax deduction for all or part of your mortgage interest, points paid to get the loan, property taxes and interest on certain home equity loans,” he explains.
In addition, “if you purchase a house for investment purposes, you can write-off upkeep and maintenance costs, and depreciation on the property as well as deduct mortgage interest and real estate taxes,” Blake says. “Although you will be taxed on the capital gains from the sale of an investment property, a 1031 Like-Kind Exchange provides the opportunity to postpone paying the tax by investing the proceeds from the sale in a similar property. You will still have to pay taxes on the capital gains from the original property, as well as the new one when it is sold.”
Quoted, New Jersey Business – February 1, 2016