Bummed because you’re not getting a refund on your taxes for 2020? Maybe you’re getting a refund, but you were expecting Uncle Sam to send you a much fatter check. Worry not, friends. If you’ve bought a home or plan to buy a home in 2021, your financial situation could look a whole lot different when you go to file your taxes next year. In fact, thanks to the numerous tax benefits of homeownership, you might just be “in the money” by this time in 2022. Following are some ways that buying a home can provide a significant boost to your bank account.
- Interest expense: With income taxes, the federal tax code allows people who own homes to legally deduct from their taxable income as much as $750,000 worth of mortgage interest paid during the year. The only catch here is that when homeowners itemize their deductions such as home interest expenses, they forego the current standard deduction. That’s more than OK, though, if itemized deductions end up being a greater sum of money. Learn more on the standard deduction (which isn’t one size fits all) by clicking here.
- Taxes on rental income: Arguably an even greater tax benefit to homeownership than deducting interest expenses is the fact that homeowners don’t have to pay taxes on imputed rental income. This is money homeowners earn by “paying themselves” instead of a landlord. In other words, the rental value of the home isn’t taxable. This ultimately results in a lucrative savings for the homeowner and is a great reason to maybe even buy more than one home, if you can afford it. Learn more here.
- Capital appreciation: Homes often increase in value in the months and years following a purchase, but the federal government doesn’t tax these gains. Therefore, homeowners filing individually can exclude up to $250,000 in home appreciation when figuring their capital gains into the mix. Meanwhile, married joint filers can exclude up to $500,000. Regardless of how you’re filing, this is a nice but often forgotten perk to homeownership.
Still on the fence about buying a home? We understand your jitters. After all, even with all the tax benefits of homeownership, purchasing a home is still in all probability the biggest financial investment of your lifetime. This, however, is why it’s so important to connect with a mortgage adviser. At Fairway of the Carolinas, our highly trained mortgage professionals have the expertise to set you on a clear and quick path toward homeownership.
Along with answering any questions you have about the homebuying process, we’ll make sure you’re fully prepared to take on a home mortgage. From the day you go house hunting to the day you get the keys to your new home, the team will be here to pilot your loan. Contact us today!
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Copyright©2021 Fairway Independent Mortgage Corporation. NMLS#2289. 4750 S. Biltmore Lane, Madison, WI 53718, 1-866-912-4800. All rights reserved. This is not an offer to enter into an agreement. Not all customers will qualify. Information, rates and programs are subject to change without notice. All products are subject to credit and property approval. Other restrictions and limitations may apply. Equal Housing Opportunity. *This advertisement does not constitute tax advice. Please consult a tax advisor regarding your specific situation.