Texas Real Estate Brokerage Sales Apprentice Education (SAE) Practice Exam

What can taxpayers deduct from their taxes?

1. Property taxes

2. Capital gains

3. Interest

4. Maintenance costs

The correct answer is: Interest

Taxpayers can deduct certain types of interest from their taxable income, primarily mortgage interest and some types of investment interest. Mortgage interest is often the largest deductible interest expense for many homeowners, as it allows them to reduce their taxable income based on the interest portion of their mortgage payments. This deduction is available on the interest paid on loans used to purchase, build, or improve a qualified residence. Property taxes, while deductible, are not categorized under interest, making this distinction important. Capital gains refer to profits from the sale of an asset and are typically subject to taxation rather than deduction. Maintenance costs, on the other hand, are generally not deductible for personal residences; instead, they may be considered when calculating the overall gain or loss when selling the property. Thus, while property taxes, capital gains, and maintenance costs have specific tax treatments, interest—particularly mortgage interest—remains a direct deduction that taxpayers can leverage to minimize their income tax liability.