Your condo is never just a home, even if it's your primary residence. It's also an investment — one you can manage. It may sound confusing at first, but getting the most out of the federal tax breaks for homeowners can be simple. Many tax rules are conditional so you'll want to meet with a pro if you're filing taxes or buying, selling or holding real estate. Here's what you should know to get that conversation started.
1. You Could Save Money Itemizing
To find out if it's worth going line by line, you'll first need to determine what's eligible for a tax break. Then, add everything together and compare the final figure to your standard deduction. There are some costs you'll likely be able to deduct, such as mortgage interest and property taxes, and some you probably won't, such as HOA dues.
2. You Could Pay Differently if Your Property is used as a Rental
Remember reading two seconds ago that you may not be able to deduct your HOA fees? Well, being able to claim normal assessments is one of the major changes you could see if you were renting your property regularly to generate income.
3. You Could Face Different Rules Every Year
One of the reliable constants of tax law is that it keeps changing. For example, you used to be able to claim mortgage insurance premiums on your taxes as deductions but since 2017, that has changed. It's almost always a good idea to get a fresh look at the new rules every year.
4. You Could Use Different Forms of Ownership
Do you own your own home, are you interested in taking out a mortgage for a second home, or could you have interest in buying an investment property? Whatever you choose, you'll need to pay tax on what you earn — including proceeds from rental and sales — and deduct any cost of ownership that the IRS deems appropriate.
Real estate tax law is not the most transparent subject out there. The best advice is to dive in. When you start looking at a specific financial situation, you often discover the hard part is finding a great investment in the first place. Why not start searching today?