Tax season can be a burden for some people but if you own a home, there can be plenty of advantages! The U.S. tax code has several benefits for those that own a home and it can help lower your taxes. Because everyone is different, it's best to consult with a tax professional to make sure you are getting all the deductions you are eligible for.
One of the biggest tax deductions is the mortgage interest you pay. Mortgage interest paid to a lender is tax deductible and can provide a large tax break, especially in the early years of your mortgage. Second mortgages can also be tax deductible. Interest paid on refinances and home equity lines are also deductible, but there are restrictions based on your mortgage amount and the fair market value of your home. If you have questions about this, talk to your tax advisor.
Discount points paid when you buy a home or refinance can also be deducted. If you are refinancing, discount points are usually amortized over the life of the loan.
Real estate taxes that are paid to your state or county can usually be deducted. If you are currently escrowing, your lender will send you a statement that shows how much you paid in real estate taxes.
There are also times when a home renovation may be tax deductible. Home improvements made for medical reasons can be deductible, but if you are doing a major renovation to improve the value of your home, it is usually not deductible.
If you have a home office, you may be able to deduct certain expenses for maintaining that office. Typically you can deduct phone lines, utilities and any costs to renovate that office. Make sure you talk to your tax advisor though as there may be reasons not to use the home office deduction.
Some mortgage programs have additional tax benefits such as a mortgage credit certificate. The MCC will allow you to write off more mortgage interest than a normal mortgage. Typically these are for first time homebuyers and are special programs through the state or county.
Once you figure out your tax benefits for owning a home, it may make home ownership more affordable than you realized! When I talk to new home buyers about the benefits of owning a home, income tax deductions are definitely one area that they can benefit from! Tax laws change frequently and so you definitely want to contact someone that specializes in that area to help you.
Leslie Vanderwerf, NMLS ID#335509, American Mortgage & Equity Consultants – Email – Website