Financial Education

Homeowner tax breaks

Owning your own home can be a source of pride and comfort, but it can also mean significant tax breaks. Talk to a tax advisor or attorney to see if you can take advantage of some of these or other potential tax benefits of homeownership:

1. Deductible mortgage interest. If you itemize deductions, you may be able to deduct the interest on a home mortgage loan of up to $1 million on a primary or secondary residence. See IRS Publication 530, "Tax Information for Homeowners," available at www.irs.gov.

2. Deductible property taxes. Most states and localities levy property taxes, which are also generally deductible on your federal return.

3. Deductible interest on home equity loans and lines of credit. Generally, the interest on loans of up to $1 million is deductible if the loan is for home improvements. If you use the loan for other purposes – such as debt consolidation, a major purchase or education funding – you are limited to deducting the interest paid on a loan of up to $100,000.

4. Capital gains exclusion on home sale. If you own your home and have used it as your primary residence for at least two of the five years prior to selling the home, married couples filing jointly may be able to exclude up to $500,000 in capital gains on the sale. Single filers can exclude up to $250,000.* Be sure to retain receipts for home improvements, as you may be able to add those expenses to the home's purchase price to establish your basis. See IRS Publication 523, "Selling Your Home," at www.irs.gov for more information.

Ready to buy a home?
  • With mortgage interest rates at historic lows and home prices still affordable, now may be a great time to buy a home. Chaco offers several types of mortgage loans, including: Conventional, FHA, VA loans, USDA loans (100%), primary residence, second homes and investments, first-time homebuyers and self-employed borrowers. At Chaco you will find competitive fixed and adjustable rates and you’ll get a pre-approval within 24 hours. Contact a Chaco mortgage professional at 513-785-3506 for more information about our attractive rates and terms.

* Certain exceptions to the ownership test and use test apply. See a tax advisor for details.

Note that neither this financial institution nor any of its affiliates give tax advice. Consult a tax advisor or attorney for information specific to your situation.

Few home sellers will be affected by new capital gains tax

Contrary to some misinformation being distributed on certain talk shows and the Web, there is no new home sale tax starting in 2013. However, to help pay for the Patient Protection and Affordable Care Act — otherwise known as health care reform —upper-income taxpayers will be subject to a new 3.8 percent tax on net investment income starting next year. Homeowners may be subject to this tax on a home sale only if:

• Their adjusted gross income is greater than $250,000 (married filers) or $200,000 (single filers), and

• The gain on the home sale exceeds the current home sale exclusion ($500,000 for married couples; $250,000 for singles).

For example, if a couple with an adjusted gross income above $250,000 sells their home for a gain of $600,000, the first $500,000 would be tax-free. Only $100,000 (the amount over the exclusion) would be subject to the 3.8 percent investment income tax as well as the usual capital gains taxes.

Source: The Tax Foundation, www.taxfoundation.org.

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When it comes to your financial plan, we understand what you need now and more importantly, what you need tomorrow. We are here to help you get the most out of both. Whether just starting out or preparing to retire, we help you become financially prepared and fully informed. At Chaco, we bring you the same expertise and competitive services as other institutions, but with the compassion and genuine care that can only come from being member-owned and operated. From CDs and savings to mortgages and more, we work to keep things simple when it comes to your finances – so you can focus on your life. And that makes a difference.