Tax Benefits for Buying a Home With Cash

Are there any tax benefits you can get for buying a home with cash?

Laura Adams, MBA
Read time: 2-min

Sharon J. wants to know:

We built a new house on land that we already owned and paid for the construction with cash. Are there any tax benefits we can get for it?

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There are no tax deductions for making improvements to a residence or paying for a home with cash.

That may not seem fair when compared to homeowners who get to deduct the cost of their mortgage interest and purchase points.

However, not having a mortgage allows you to save a huge amount of money. If you had taken out a $150,000 mortgage at 4% for 30 years to build your home, you'd end up paying over $107,000 in interest alone.

You can deduct any state or local real estate taxes charged for your property, if you itemize deductions on your tax return.

Additionally, when you sell your property you can exclude up to $250,000 of profit (or $500,000 if you're married and file taxes jointly) from tax, as long as you've lived in the home for 2 of the previous 5 years before the sale.

This benefit is called the capital gains tax exclusion and it's available no matter your age, income, or number of times you sell a primary residence in your lifetime.

Read or listen to Top 5 Financial Benefits of Owning a Home to learn more.

If you have a mortgage and want to know more about claiming tax deductions you're eligible for, watch my Mortgage Interest Deduction FAQ VIDEO.


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About the Author

Laura Adams, MBA

Laura Adams received an MBA from the University of Florida. She's an award-winning personal finance author, speaker, and consumer advocate who is a trusted and frequent source for the national media. Her book, Debt-Free Blueprint: How to Get Out of Debt and Build a Financial Life You Love was an Amazon #1 New Release. Do you have a money question? Call the Money Girl listener line at 302-364-0308. Your question could be featured on the show. 

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