Accountant · 33301 · Member since 2022 · 57 posts · 43 votes
Hello everyone!
As a CPA specializing in real estate taxes, I often get asked about the basics. So, let's start with an overview:
1. Property Taxes: These are local taxes levied by the county or municipality on real estate. The amount is based on the assessed value of the property and the local tax rate.
2. Capital Gains Tax: If you sell a property for more than you paid for it, you may owe capital gains tax. The rate depends on how long you've owned the property and your income level.
3. Mortgage Interest Deduction: You can deduct the interest paid on a mortgage used to buy, build, or improve your home.
4. Depreciation: For investment properties, you can depreciate the property over a set period, reducing your taxable income.
5. 1031 Exchanges: This allows you to defer capital gains tax by reinvesting the proceeds from a sale into a similar property.
Feel free to ask any questions or share your own experiences!
I had question about the mortgage interest deduction on my primary home. I understand that I can deduct mortgage interest up to $750k on my personal residence. Let's say my 1st mortgage balance is $600k and I want to take out a 2nd mortgage for $150k for home improvements which makes the interest on the 2nd deductible as well. Obviously I want the lowest interest rate as possible, but the way I'm looking at it, is it doesn't make much difference if the interest rate on that 2nd mortgage is 6% or 9% since the mortgage interest is deductible. Either way, the deduction of that interest ends up being a refund to me every year and gets put back into my pocket. Would you say I'm looking at it correctly? Or am I looking at it wrong? TIA.
