Home Ownership Tax Deductions – “Eyeball” those home ownership benefits!!!
Your parents told you – owning a home is a wise investment over the long run.
The past real estate crash caused by irresponsible lenders and uninformed buyers caused some pause (a whole lot) which has taken many years to recover and still not fully back. But…things are turning for the good and home ownership is back by popular demand plus home ownership tax deductions.
2. How Does Owning A Home Benefit You? What Is Equity?
Equity defined: The amount of money you can sell it for minus what you still owe on it. Monthly you pay day down the mortgage with a payment which in-turn reduces the balance or amount you owe. The reduced mortgage causes your equity to grow. The new “Qualified Mortgage” rules have greatly increased the chances of you accumulating equity. Interest on your mortgage is the most in the beginning and decreases as years go by. Principal payments increase over the years as interest decrease. This causes equity to grow as more of your payment is working for you vice interest
3. What Are Home Ownership Tax Deduction Benefits?
- Mortgage deduction The IRS allows homeowners to deduct the mortgage interest from their tax obligations. This is especially important for many people as the deduction can be very large. As previously mentioned, interest is a large part of the mortgage payment in the early years of home ownership.
- Closing cost deductions: Year One when you buy your home, you can claim the points (also called origination fees) on your loan, whether they are paid by you or the seller. Origination fees of 1 percent or more are the norm and savings considerable.
- Real Estate/Property tax: Deductible: Real estate property taxes paid on your primary residence and a second/vacation home are fully deductible for income tax purposes.
4. Home Equity or HELOC Tax Deductions:
The interest you pay on a home equity loan (or line of credit/heloc). This allows you to shift your credit card debts to your home equity loan (be careful), pay a lower interest rate than the higher credit card interest rates plus get a deduction on the interest as well.
5. Capital Gains Exclusion (A huge deal)
If you buy a home to live in as your primary residence for more than two years then you will qualify. When you sell, you can keep profits up to $250,000 if you are single, or $500,000 if you are married, and not owe any capital gains taxes. A great benefit for those getting ready to retire or downsize.
6. Forced Savings Plan – Your Mortgage
Saving is a very important part now and for the future. As stated earlier, accumulating equity is one way of your total financial plan to save.
7. Own A Home or Rent? Over the Long Term Buying Wins Out
Call it throwing money away when renting. But in some cases in your early years you may need to rent while saving to buy that dream home. In time, when you buy home ownership benefits outweigh renting. After all, you do want to choose your own paint colors? Choose your home, location, and terms carefully and you will win out over the long haul.
Home Ownership Tax Deductions
Your REALTOR® can be a big help in home ownership – use their expertise to your benefit. Consult your tax advisor when it comes to deductions for the latest laws.