Tax Deductions!

Homeownership carries lots of responsibilities and occasional expenses. But at tax time, owning almost always trumps renting. That’s because Uncle Sam lets homeowners take a laundry list of deductions or exemptions on everything from mortgage interest and capital gains on a sale to maintaining a home office or even renting out a second property. Aside from deductions, home ownership may allow for tax credits and other benefits, too. Here’s a look at deductions available to many homeowners. Some apply for 2006; others you can prepare for in advance of taxes filed for 2007.

Not all deductions will be available to all homeowners, and some might work only for homeowners who itemize their tax deductions. But it never hurts to run through the options with your tax preparer or the Internal Revenue Service www.irs.gov; 1-800-829-1040.

1: Home-loan interest

You can deduct the interest portion of your mortgage payments each year. According to the National Association of Realtors, only about one-third of all taxpayers itemize (i.e., catalog) their deductions on their returns; of those who do, at least 60 percent deduct mortgage interest. For some homebuyers, the increased costs of owning versus renting are often offset by this significant deduction, which has been available since 1913. It applies to the interest from both your primary mortgage and any second mortgage you may have on a property, such as a home-equity or home-improvement loan.

2: Points on a loan

Points amount to 1 percent of a loan’s principal, and lenders may charge points as part of your loan. You can deduct points on the purchase of a home but not points related to a mortgage broker’s fees. Deductions for points can take place when you purchase a home or refinance a home loan.

3: Property tax

Local and state-level property taxes get a full deduction. However, if you are disabled, elderly or own a property eligible for listing on a local or national registry of historic places (see related story), you may be eligible for property-tax exemptions or reductions in the total amount of property tax owed.

Seattle’s Condo Craze

For those who have been paying attention to Downtown Seattle’s skyline, you may have noticed a significant increase in new mixed-use construction, condo conversions, and other residential highrise developments.  There are over a dozen different projects totalling over two thousand new units currently underway, and researchers are confident that market demand will continue to increase for these types of housing.

Skeptics are wary of flooding the market with too many condominiums at once, but developers say that the target income brackets for high end condos in the Downtown and South Lake Union areas are some of the fastest growing in Seattle.  Attempting to attract empty-nesters away from big suburban homes is done with the promise of luxury amenities and convenience- who wants to mow the lawn when you can go to the spa instead?  Another target group is upwardly mobile young professionals who want to live close to the restaurants and nightlife of Seattle’s downtown core.

Regardless of who buys, the benefits of urban living are being packaged and marketed en masse by various projects, from luxury condos on top of hotels to modern urban lofts that appeal to Seattle’s hipsters and artists.  With change on the horizon, the question remains of what type of communities will form within and around these new developments.  Thankfully, with Seattle’s inclination towards urban villages as more walkable and liveable neighborhoods, shared open and green spaces will help to add some personality and character to what could otherwise become a cold and colorless exercise in urban density.  If you’re wanting to move into the city, you better act fast- many units are pre-selling quickly!