Federal Income Tax Laws Affecting Real Estate

Question 1

What are the limits for a home mortgage interest deduction?

Answer 1

Up to $1,000,000 in debt or $500,000 married filing separately.

Question 2

How do you compute the amount of money can be deducted for the mortgage interest deduction for home EQUITY loans. And what are its limits.

Answer 2

Mortgage interest deduction = current value - current mortgage balance = number of dollars owner can use.

Up to $100,000 in debt $50,000 if married filling separately.

Question 3

What are the limits to avoid capital gains tax on the sale of principle residence.

Answer 3

Single filer $250,000

Married Couples $500,000.

Question 4

What are like-kind exchanges.

Answer 4

AKA 1031 exchange

real estate for real estate. Used to avoid taxes.

Question 5

In a like-kind exchange what is the boot?

Answer 5

Boot is the balance for a swap left over in the form of cash, mortgages, or unlike properties.

Who ever receives the boot has to pay taxes on the boot.