Home ownership is part of the American dream. According to the U.S. Department of Housing and Urban Development, 62.9% of Americans own their own homes in the second quarter of 2016. There are many reasons that we want to own rather than rent a home—for example, as a way to build up equity. But there are also sound tax reasons favoring home ownership. Certain expenses of home ownership are deductible. And when you sell your home, some or all of your profit may be tax free. If you had problems with your mortgage or lost your home to foreclosure, there may be special tax breaks for you.
This chapter explains the tax breaks you can claim with respect to your home. Casualties and disasters that can befall your home, and the deductions you can claim for them, are explained in Chapter 13. The home office deduction for using a portion of your home for business is explained in Chapter 15.
For more information, see IRS Publication 521, Moving Expenses; IRS Publication 523, Selling Your Home; IRS Publication 530, Tax Information for First-Time Homeowners; IRS Publication 936, Home Mortgage Interest Deduction; and IRS Publication 4681, Canceled Debts, Foreclosures, Repossessions, and Abandonments.
Mortgages are a way to leverage yourself into home ownership: The bank or other lender (called the mortgagee) lends you the funds needed to buy your home over and above your out-of-pocket investment. You become the mortgagor and each month repay a portion of the ...