Did you know certain tax breaks come with homeownership? If so, do you know what they are? If the answer to either of these questions is no, consider this a public service announcement. Or better yet, an early Christmas present. If you’re on the fence about buying a home and need extra incentive to make a home purchase, perhaps the tax benefits associated with being a homeowner will lead you forward. In any case, you deserve to know about these tax breaks. Otherwise, you can’t take full advantage of them if you’re a homeowner or become one. Up next, learn about three tax benefits of owning a home that can put more money in your bank account.
1) Mortgage interest deduction
When it comes to the tax benefits of owning a home, none are bigger than the mortgage interest deduction. You can deduct all the interest you’ve paid on a mortgage worth up to $750,000. If you’re married and filing separately, that number is cut in half. If your mortgage is over $750,000, you can still deduct interest. It just won’t include the interest you’ve paid on the full loan amount. So if your loan was for $900,000, you wouldn’t be able to deduct the interest you paid on the extra $150,000. Nevertheless, this is a pretty sweat deal. So be sure to mention it to your CPA when you file your taxes.
2) Mortgage points
When you enter into a mortgage, you might pay some money up front to lower the interest rate on your home loan. This money is known as “discount points” or “origination points.” If, for example, you paid enough to receive two points, the points would equal 2% of your mortgage balance. So if your loan was for $250,000 and you paid $5,000 up front, you would get two points since $5,000 is 2% of $250,000. Come tax time, you can deduct mortgage points on your taxes for the year you pay them. Or you can deduct them gradually over the life of the loan. If you wish to deduct them in full the year you paid them, you’ll just need to meet these requirements from the IRS.
3) Property tax write-off
The tax code allows homeowners to deduct up to $10,000 in local taxes. These taxes include those for property, sales, and state and local income. Just be careful not to claim too much in sales tax because you won’t be able to deduct as much in property taxes. You can learn more here.
Questions about the tax benefits of owning a home? We’ll be happy to answer them. Contact us and let’s set up a time to chat. When we do, we’ll be happy to answer any questions you have about home loans or homeownership. We look forward to serving you with excellence and care.
GET A FREE RATE QUOTE