Benefits to Owning a Home
For most people, buying a home is a major investment and deserves careful consideration. There are so many factors to consider when taking the leap of ownership. Below are a few tips that can help prepare you for what to expect when it comes to factors like tax deductions, credits, and exclusions for homeowners.
Tax breaks –
Tax breaks are one of the many benefits to ownership. Homeowners can participate in one of the largest home tax breaks available: the mortgage interest deduction. This tax break is a great advantage when homeowners are in the beginning stages of mortgage when payments go toward paying off the interest instead of the principal.
You may have heard of the term, “paying points.” What does that mean? When buying a house, borrowers can pay “points” or a fee that is usually a percentage of the loan amount to the lender to obtain a mortgage. Homeowners could deduct the full value of the points in most situations if the amount paid is common for that area.
Property Tax –
By itemizing your deductions, you may be able to deduct a portion or all the property taxes on your primary residence as well any other owned property – if the home is a primary residence. But remember, you must claim it during the year you made the payments.
The private mortgage insurance (PMI) deduction treats mortgage insurance premiums like mortgage interest for tax purposes. Homeowners paying PMI may be eligible to claim the deduction on their federal income tax return. To claim this deduction, homeowner must itemize and make no more than $109,000 (if filing jointly). The mortgage itself must be the primary residence.
Home office –
Are you working remote? Certain homeowners who work out of their home are eligible for the home office deduction. The IRS allows homeowners to write off the costs required to run a business from you home. Remember, to take advantage of this benefit, you will need to itemize your deductions and state that your space is a main place of business and used regularly.
Homeownership can be stressful, but it comes with great advantages that can financially help you along the way. Educating yourself on the benefits of owning a home can help make the process a little less daunting.