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California real estate ownership has tax benefits

Our readers in the Bay Area are aware that there are many ways in which people can minimize current tax liabilities. There are also ways in which you can limit future tax liabilities. Occasionally there are ways in which you can do both.

According to reliable sources, California home ownership has tax benefits, both as a current tax deduction and also in terms of estate planning. One of the areas of overlap is that of capital gains tax advantages.

For those who own a home for a minimum of two years (during the preceding five year period), it is possible to take advantage of a capital gains tax exclusion. An individual can exclude up to $250,000 and a couple can exclude up to $500,000. Using round numbers, it you are a single person buying a house for $300,000 and you sell it three years later for $550,000 you do not have to pay capital gains tax on the profit amount of $250,000. This exclusion can be claimed once every two years.

There are other tax advantages to home ownership. It is currently possible to take a tax deduction for the mortgage interest portion of your mortgage payment. This works out well for new home owners because the interest is a higher percentage of your mortgage payment in the early years of a home loan.

A third way in which home ownership is advantageous is that real estate property taxes are fully deductible in California.

Home ownership is an expensive proposition in the San Francisco Bay area, but the tax advantages can help mitigate the expense.

Source: Yahoo! News, "3 Tax Benefits of Owning Los Angeles Real Estate," Sept. 17, 2012

At our San Francisco law office, we represent clients with tax issues including those dealing with capital gains taxes.

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