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If you buy a home with maximum leverage, as much as 90% to 95% of your monthly loan payments consist of interest - which is deductible. You can deduct the interest on a home loan of up to $1,000,000. In addition, your real estate taxes are also deductible. If you have any equity in your home, you can borrow against the equity (up to $100,000) and deduct that interest - regardless of how you use that money. With the current low rates on home loans, you only need to find a profitable way to invest that money to earn long term gains - like buying distressed bonds with borrowed funds. If your home appreciates, you can sell it for a tax free gain of up to $250,000 per taxpayer every two years. Gains that result from "sweat equity" (the work that you do to increase the value of the home) are not treated any differently. Or if you have other assets that are earning taxable income, consider using those funds to pay off your home loan. Instead of increasing your deductions, you will be reducing your income - which is even better. A paid off home is the ultimate tax shelter and is usually more profitable than having a lot of interest to deduct. But either way, you get big tax breaks with a personal residence.
Tax Deductions For An Office At Home
You don't have to own a home in order to deduct whatever part of it is used for a trade or business. And the real benefit is not limited to deducting a percentage of your rent or depreciation on a home. You also get to deduct a portion of all the costs associated with your residence. That would include utilities, maintenance, insurance, etc. The key to the office at home deduction is that you must use a portion of the home exclusively for business purposes. In addition, the home office must be your principal place of business. It isn't necessary that your business be a full time business and it's not essential that you make a profit from the business every year. While your home office deduction is limited each year to the amount of your taxable income from the business, any excess deduction can be carried forward to a future tax year until you are making some money that would otherwise be taxable. Thus, it's like putting some tax deductions in the bank until you need them.
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