The Many Tax Benefits of Buying a Home: What you Should Know
Buying
Buying a home is a wonderful idea for many reasons: in addition to the benefit of having free rein when it comes to improvements and renovations, buying a home also offers opportunities for privacy, freedom, and the development of wealth. But did you know that the process is ripe with tax benefits, as well?
If you’re unfamiliar with the tax benefits of buying a home, read on to learn more.
The 5 Biggest Tax Benefits of Buying a Home
1. Mortgage interest tax breaks
The single biggest tax benefit associated with buying a home comes in the form of the interest you pay on your mortgage. Unless you take out a mortgage loan that exceeds $1 million, you’ll be able to write off all of the interest you pay on your mortgage. This is also applicable for anyone who refinances a home or takes out a home equity line of credit.
2. Points paid
If you paid points to secure a better rate on a home loan, you’ll be able to deduct them during the year they were paid. This is also true for people who take out a loan to build a home or to purchase their primary residence. Claiming points paid can be difficult, though, so it’s wise to hire a tax professional to guide you through the process.
3. Property taxes
Every homeowner must pay property taxes, but the good news is that they’re all deductible. These totals will be present on your annual lender statement, and can be deducted in full with the IRS.
4. Sales gain
When you decide to sell a home you own, you stand to save some money in taxes on your sales gain. According to IRS laws set forth in 1997, between $250,000-$500,000 is free of tax just so long as you lived in and owned the property for at least two years before the sale took place. Contact your tax specialist about how to claim this benefit if you’re thinking of selling your home in the coming year.
Owning a Home Comes with Tax Benefits
When you own a home, you’re privy to the many tax benefits implicit with home ownership. From interest payment write-offs to insurance and sales gain, there are many ways to save money on your taxes when you own a home. By understanding and being aware of these things, you can save big money on your taxes each year!
