How Tax Deductions Work?

In most cases, homeowners are able to deduct the amount of mortgage interest paid in the tax year as well as property taxes. When you sell the house, you don’t have to pay capital gains tax on the first $250,000 for a single person or $500,000 for a married couple. Obviously, the financial deck is stacked in favor of home ownership. Ron and Laura took advantage of this exemption when they both retired and sold the home they had lived in for 23 years. Their $62,000 home had appreciated to $219,000, and when they sold, everything was tax-free. They bought a motor home with half of the proceeds and banked the rest. After closing on their home, they drove out of the title company’s parking lot in their new motor home and off into the sunset. If they had been renters, there would have been no motor home, no $100,000 bank deposit, and no driving off into the sunset.