Few in this generation if any will remember a time when the government didn’t have policies in place to encourage home ownership. Home ownership is the quintessential foundation of the American dream. Therefore, the different incentive programs offered by the government to encourage home ownership can almost be considered a religious right to most Americans in this era.

The first tax shelter is the Mortgage Interest Deduction. All but the most expensive homes bought by the ultra wealthy can deduct all of the interest they pay on their loan for their home. The mortgage interest deduction is the most common and the most known about tax shelter. Because mortgage loans are so much higher than any other thing an average American will own, they will want a while to pay back there loan, which means that each month a lot of interest is being paid to the banks. The government officering to pay off the interest is a great incentive to buy a home knowing they will not have to lose a lot of money on the interest payments. Where this form of tax shelter gets tricky is the interest paid on a home equity loan. The government will only pay the interest on up to $100,000.

The second form of tax shelter is the mortgage tax credit. A mortgage tax credit is more geared towards first time buyers as they more often than not need the relief with the cash situation. To get a tax credit a home buyer will have to get the proper approval from the local agency dealing with housing. This tax credit will give an approved first time buyer in the housing market up to twenty percent for a federal tax credit. This means that the federal government will pay on a one to one basis of the dollars paid in the federal income tax. So if the interest paid in one year is $20,000 then the federal government will give the qualified first time home buyer a $4,000 dollar tax credit on their federal income taxes. All the rest of the money not paid or credited can be included in the interest deduction from the mortgage interest deduction.

The next tax shelter a home buyer may find beneficial is the actually property taxes themselves. A home buyer can write off all the money spent on taxes from their actual income. The government will not count the money used to pay the property taxes as an actual part of an individual’s income. It is important that the escrow account used to hold the money for the property tax is not used in the tax calculation that will be used the year after.

The final principle is the money gained by selling a home. If a home is used as the primary source of residence for over two years, the government will let the seller earn up to $250,000 in profits from the sell of the home. The selling tax shelter allows a lot of money to be earned from buying, living, and then selling a home. Homes truly are one of the best investments most Americans will make in their lifetime.

Author Bio: Juhlin Youlien is a source on how to get great Chandler AZ homes for sale and Gilbert AZ homes for sale. He also writes about Fountain Hills real estate and Tempe AZ homes for sale.

Category: Real Estate
Keywords: homes, real estate, buying a home, selling a home, realtor, realtors, loan, mortgage, foreclosure, s