If you’re a devoted renter or are on the fence about buying a home, have you considered the numerous tax breaks you could take advantage of if you were a homeowner? Renters have virtually no tax benefits, other than deducting home office space or property tax payments that are bundled into their lease agreement.
On the other hand, Uncle Sam provides a financial incentive for people to own a home by providing the following tax breaks.
- Mortgage Interest Deduction — The interest you pay on your mortgage is tax-deductible for any home loan up to $1 million dollars. As a new homeowner, this tax perk can be a big help, since interest makes up most of your mortgage payments early on.
- Mortgage Interest Credit — In addition to deducting your mortgage interest payments, you may also be able to get a refund for a portion of those payments if you meet certain eligibility requirements and obtain a Mortgage Credit Certificate (MCC) prior to buying your home.
- Mortgage Discount Points — Mortgage Discount Points are something you can purchase to lower your interest rate when you first buy your home, and they’re tax-deductible.
- Mortgage Insurance — If you purchase a home with less than 20% down and have to pay mortgage insurance, you can deduct those payments on your taxes as long as your adjusted gross income (AGI) is less than $109,000.
- Sales Taxes — The sales tax you pay when you buy your home is also tax-deductible. This is especially helpful if you live in a state without income tax or if your home’s sales tax costs more than your income tax.
- Real Estate Taxes — As long as your home is your primary residence, your real estate taxes (or property taxes) are tax-deductible, too.
If buying a home makes sense for you financially, contact us today to learn more about the home financing process. We’ll be here to guide you through each step and to answer any questions you have.