Copyright ©​ Daniel Cullinane CPA.

For many people, their home is their largest asset, or at least a sizable one. During your retirement years you can use your home equity to provide additional income. Moreover, the tax laws make it easier for you to build equity and to tap the equity without sharing it with the IRS. If you are in the market to buy a home, buy a property in a neighborhood you think will improve and thus add to your house'e value. Drive a hard bargain to avoid overpaying. Then once you own a house, consider buying a vacation or weekend home. No matter whethr you are buying a primary residence or a vacation home try to get as large a mortgage as possible

  • The interest on money borrowed to buy a house and a vacation home will be deductible, up to a tytal of $1 million worth of debt

As your home equity grows you will owe no tax until you sell. Even then on a primary residence up to $250,000 worth of profit on the sale is tax exempt., if you are married the exemption is $500,000. Excess gains will be taxed at 15%, but the rate is increased to 20% for single filers with income above $400,000 and joint filers with income above $450,000 To qualify for the gain exclusion, you must have owned and lived in the home for at least tow out of the five years prior to the sale.


the exclusion rule described above replaced the old law's $125,000 one time exclusion for taxpayers age 55 and over. Even if you have already taken  the over 55 exclusion  you can use the $250,000/$500,000 tax break.


The $250,000 or $500,000 capital gain exclusion is not a once in a lifetime tax break. You can use the exclusion once every two years. You just have owned or occupied your home as a principal residence for at least two out of the five years prior to the sale. One strategy is to sell an appreciated primary  residence, pocket tax free proceeds and move into what had been a vacation home. After living there for two years, you can sell  this home too and claim an exclusion.


You might, take out a home equity loan. Say your house is appraised at $200,000 and you have an outstanding mortgage of $80,000, You have  $120,000 in home equity. Most banks will lend you as much as $100,000 against this  equity.  You can use as much or as little as you want without owing tax The interest on a home equity loan is deductible up to $100,000 of debt


Typically, revere mortgages pay you a fixed amount each month. In some cases, you can get a lump sum, either up[front or in case a need arises late. Another approach is to give you a line of credit upon which you can draw equity as needed.  The loan proceeds will be free of income tax


Daniel Cullinane CPA

25 Plaza 5 25th fl Jersey City NJ                                          phone 732-516-1648 fax 732-516-9778

MBA Taxation

Daniel Cullinane CPA

2500 Plaza 5 25th fl  Jersey City NJ 07311                                                          phone 732-516-1648  fax 732-516-9778

                 MBA TAXATION