Tax Aspects of Owning a Home

Question 1

List the investment aspects of homeownership?

Answer 1

1. The value of the property can increase over time, allowing the owner to realize a profit when they sell the property
2. As the owner pays down the mortgage, the equity increases.
3. The owner can take advantage of several income tax deductions including property taxes and mortgage interest.

Question 2

Define equity

Answer 2

Equity is the paid-off share in the property that the owner actually owns

Question 3

What did the Taxpayer Relief Act do?

Answer 3

It reduced several federal taxes in the US

Question 4

What is capital gain?

Answer 4

It’s the amount by which an asset’s selling price exceeds its initial purchase price

Question 5

What is the Taxpayer Relief Act?

Answer 5

Allows a special exclusion on capital gains for homeowners selling their own home. A seller can exclude up to 250k of any capital gain on the sale. If the sellers are a married couple, they can exclude up to 500k in gain. People can use this exclusion once every 2 years.