Home Ownership

Mortgage Interest

Home mortgage interest on up to $1 million ($500,000 if married filing separately) of home-acquisition loans secured by your principal residence and/or second home is generally fully deductible. You can use the loan proceeds to buy, build or significantly renovate your home. Also, mortgage interest on a home equity loan up to $100,000 ($50,000 if married filing separately) can be deducted. Therefore, interest can be deducted on total home debt of up to $1.1 million ($550,000 if married filing separately).

Tax Exclusion of the Sale of a Principal Residence

When you sell your principal residence, you can exclude from income up to $250,000 in gains ($500,000 if married filing jointly or a surviving spouse if the sale is within two years of the other spouse’s death).

To qualify, you must have owned and occupied the home as your principal residence for at least two years (aggregate) during the five-year period ending on the date of sale and could not have claimed an exclusion on another sale within the previous two years.

The exclusion is available even if you took temporary absences (including vacations) or rented out the home while not living there. Special rules are provided for a sale of the home due to certain health issues, employment reasons or unforeseen circumstances.

Keep in mind that if you took a First-time Homebuyer Credit, you may have to repay or recapture some or all of the loan/credit in 2011.

Information is current as of Monday, Dec. 12, 2011.  

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This article was provided by the American Institute of Certified Public Accountants (AICPA).