Tax Myths of Home Owners

Last Revised on February 15, 2008

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Homeownership tax myths are sometimes surprising. The tax benefits of buying a home are not always so clear-cut:

1. Mortgage interest will reduce my tax bill. This tax break won’t work forever.

2. All costs related to my home are deductible. It’s flat-out false.

3. I must use home profits to buy a new home. This used to be the only way to get around a tax bill on a home sale, but not anymore.

4. Putting my children on the deed is tax-smart: Worries about taxes on a residence sometimes lead homeowners to fall for this myth. It’s a particularly tricky one, because it combines confusion about residential taxes with the even more complex estate-tax area.

5. If I take a loss on a sale, I can write it off: It is true that real estate, like any other asset, has the potential to go down as well as up in value. But unlike most of those other holdings, you cannot write off any loss you suffer if you must sell your main residence for less than what you paid.

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