IF YOU OWN a home or are planning to buy one, there are a few things you need to know from the tax standpoint that could save you money: 1. Mortgage Interest If you have a mortgage, you can typically deduct the interest you pay on the loan up to $750,000 ($1,000,000 if taken before December 16, 2017) but only if you itemize your deductions (schedule A) You can also deduct points you paid if you itemize. Many people miss deducting points on their tax returns when they purchase a house, but you have to meet some criteria like:

1. The points relate to a mortgage to buy, build or improve your principal residence
2. Points were reasonable amount charged in that area
3. You provide funds (at or before closing) at least equal to the points charged
4. The points clearly show on the settlement statement

In general, points to get a new mortgage or to refinance an existing mortgage are deducted ratably over the term of the loan.  Note that the deductible points not included on Form 1098 (the mortgage interest form) should be entered on Schedule A (Form 1040), Itemized Deductions, line 8c “Points not reported to you on Form 1098.” 2. Property taxes Property taxes can be deducted on your tax return if you itemize deductions. The total amount of taxes (including state and local income taxes) is capped at $40,400 for 2026. This cap is temporary and will increase by 1% annually through 2029 before reverting to $10,000 in 2030. If you make between $500k to $600k of modified adjusted gross income, the $40.4k deduction is reduced by 30% for each dollar you make. At $600k MAGI, the deduction drops to $10k, potentially raising marginal tax rates to 45.5% (!) for singles due to “SALT torpedo” if you are in the $500-600k range. If you are at that range, it’s recommended to mitigate this by lowering AGI/MAGI by maximizing pre-tax 401(k)/403(b), HSA, FSA contributions, timing RSU sales, tax loss harvesting, or deferring income/accelerating expenses for business owners. 3. Improvements Improvements are significant enhancements made to your home that increase its value. Many people overpay on taxes when they ultimately sell their house because they don’t keep track of these improvements. Here are some examples provided by the IRS: > Putting an addition on your home > Replacing an entire roof > Paving your driveway > Installing central air conditioning > Rewiring your home > Building a new deck > Kitchen upgrades > Lawn sprinkler system > New siding > Built in appliances > Fireplace Now, these costs aren’t deducted, but they are added to your home’s cost basis. This could lead to lower capital gains taxes when you sell your property (more on this later). Repairs, on the other hand, don’t impact your basis and don’t affect your taxes (e.g. repairing a broken fixture, patching cracks, etc) You will need to document every improvement, as this can help you save money on taxes. Keep your receipts and invoices (upload them to Google Drive) and record the dates and descriptions of the work done. Taxes when selling your house When you sell your house, here’s the formula: Selling price  > Selling expenses (like realtor fees) > Adjusted cost basis (how much you purchased it for + all these capital improvements I talked about above + any closing costs you paid when you acquired the home (legal fees, recording, survey, stamp taxed, title insurance) = Gain/Loss You will need to pay capital gains tax if there is a gain, but, luckily there is a gain exclusion (Section 121 exclusion) that can also help you save on taxes: 4. Gain exclusion If you sell your primary residence, you may be able to exclude up to $250,000 ($500,000 for married) of the gain from taxes if you meet some conditions. > Ownership (must have owned the home for at least 24 months within the 5 years prior to sale. For married couples only one spouse needs to meet this requirement) > Residence (you must have used the home as your main residence for at least 24 non-consecutive months during the 5 years before the sale. For married couples both spouses must meet requirements. > Look-back (you must not have claimed the exclusion on another home within the 2 years before this sale) Now, many people don’t know this but there is actually a partial exemption.  1. Work related move (i.e. you started a new job at least 50 miles farther from home) 2. Health related move (you moved to obtain, provide, or facilitate care for yourself or a family member) 3. Unforeseeable events (casualty, divorce, death, financial difficulty) 4. Special circumstances So, instead of claiming the full exclusion, you can exclude a prorated portion of the $250,000/$500,000 limit based on how long you owned and lived in the home. By the way, you can rent out a home for 2 years and still qualify for the exemption, as long as you lived there for the required period before selling (many people do this). 5. Tax example selling a home You bought a home for $200,000 (including all other costs) in 2018. You built a new deck, new roof and siding totaling $50,000. You now sold your home for $500,000. You are single. Selling costs are $20,000 (agent fees, etc) Sale price: $500,000 -$20,000 of selling costs (200,000 + 50,000) = -$250,000 (adjusted basis) Total Gain = 230,000 Exclusion = $250,000. Total taxes paid = $0. But what if you didn’t keep track of all your renovation costs like new siding or a deck? You would’ve had to pay taxes on $20,000 of capital gains!  Overall, knowing how these things work can literally save you thousands in taxes. Do you have any tips with homeownership? Share some in the comments!   Bogdan Sheremeta is a licensed CPA based in Illinois with experience at Deloitte and a Fortune 200 multinational.

THERE'S BEEN DRAMA recently in a normally quiet corner of the market. This story got its start back in 2015, when Warren Buffett helped to merge food makers Kraft and Heinz. At first, it looked like a smart idea. Through cost-cutting, the combined company was expected to save more than $1 billion in annual operating expenses. “This is my kind of transaction,” Buffett said at the time, “uniting two world-class organizations and delivering shareholder value. I’m excited by the opportunities for what this new combined organization will achieve.” The excitement was short-lived, and many observers were skeptical from the start, mainly because Buffett had teamed up with a private equity firm called 3G to make the purchase. 3G had a reputation for being overly zealous when it came to cost-cutting. Initially, Buffett defended 3G. They “could not be better partners,” he wrote in his 2015 annual letter. But within a few years, it became clear that the skeptics had been right. Sales at the combined company began falling, and in 2018, Buffett’s Berkshire Hathaway recorded a $15 billion write-down on the value of its Kraft Heinz holdings. The following year, Buffett publicly acknowledged that the merger had been a mistake and that Berkshire had overpaid for its stake. “The business does not earn more because you pay more for it,” he said. In the years since, Kraft Heinz has continued to struggle with declining sales. To address the problem, in January of this year, the company brought in a new CEO, Steve Cahillane, and tasked him with splitting the company back up again. By that point, though, Buffett had changed his mind again. His view was that it was now better to leave the combined company intact rather than going through the costly exercise of trying to break it back up. A breakup, he said, wouldn’t create value. “It doesn’t do a thing, you know, for what the ketchup tastes like.” Despite his influence, though, the break-up plan appeared to be moving forward, and Cahillane took the helm on January 1 with that mandate.  Within weeks, Cahillane came around to Buffett’s point of view. The company’s woes were more fundamental, he told the board, and breaking it up wouldn’t address those core issues. Where things go next is an open question.  This story is notable because of Warren Buffett’s involvement, but it turns out not to be so unusual. Studies over the years have found that corporate mergers and acquisitions, on average, do not create value. According to a study by KPMG of more than 3,000 acquisitions, 57% of deals were found to detract from shareholder value rather than increase it. Other research puts the failure rate in the neighborhood of 70%. Aswath Damodaran, a finance professor at NYU, sums it up this way: “More value is destroyed by acquisitions than by any other action that companies take.” Why do so many transactions detract from shareholder value? Economist Richard Thaler attributes it to what he calls the “winner’s curse.” This phenomenon was first identified in the petroleum industry, where competitive auctions are held for oil leases. Research found that the winners of these competitive auctions often ended up disappointed—not because they didn’t find any oil, but simply because they had overpaid. Thaler explains that auctions—especially when there are large numbers of bidders—can cause some participants to become emotional, to the point that they become undisciplined and end up bidding too much. The winners in these situations are thus “cursed” because they’re the ones who were willing to overpay the most and thus tend to be most disappointed. Thaler found that the winner’s curse dynamic appears across industries, and that is what explains the poor track record of corporate acquisitions. Competitive situations, whether it was in the Kraft-Heinz case, or in the one that recently played out in the competition for Paramount, can cause prices to go too high. That’s great for sellers but a key reason why acquirers often end up regretting their decisions and why a large number of corporate takeovers end up being reversed. So why, despite all this data, do corporate managers—including even Warren Buffett—pursue these transactions? There are three key reasons.  The first is that they’re an easy way for companies to combat stagnant growth—much easier than the hard work of developing new products. This helps explain the Kraft-Heinz tie-up. According to a write-up in 2015, when the merger was first announced, many of Kraft’s businesses had been stalled out, delivering zero or even negative growth. Another reason mergers and acquisitions are popular despite the odds: Corporate managers tend to overestimate the economic benefits—so-called synergies—that will result from a transaction. Consider companies like Kraft and Heinz. It was easy to make the argument that two companies in the same industry would be able to gain significant efficiencies by combining operations and realizing economies of scale. And since some number of transactions do succeed, even if it’s only a minority, it’s natural for corporate managers to believe that their transaction will be the one to beat the odds. In a 1986 paper, economist Richard Roll identified a related phenomenon, which he dubbed “the hubris hypothesis.” The logic is as follows: Corporate managers who find themselves in a position to be making acquisitions are, by definition, probably doing well. Their stock prices are up, and they likely have cash in the bank. Because their businesses are strong, they’re more likely to feel self-confident in their ability to succeed with a merger or an acquisition even when the data suggests the odds are against them. The lesson for individual investors? Companies will probably always pursue transactions like this that end up subtracting from shareholder value. But since there’s no way to predict when this will happen, I see this as yet another reason to choose broadly-diversified index funds, where any one company’s mistake generally won’t have too much of a negative impact. Also, to the extent that the company being acquired is also in the index, passive fund investors can enjoy the benefits that accrue to that company’s shareholders.   Adam M. Grossman is the founder of Mayport, a fixed-fee wealth management firm. Sign up for Adam's Daily Ideas email, follow him on X @AdamMGrossman and check out his earlier articles.