Tax advantages of Homeownership
Did you know the benefits of homeownership extend to tax season? Federal tax deductions may add up to significant savings every year, but you will need to itemize deductions rather than take the standard one, which can mean more tax forms to complete.
- Mortgage interest is a big part of your house payment, and the good news is the total amount of interest you pay on the loan is fully deductible. If you refinance or have a home-equity line of credit, interest on those loans is deductible too.
- Property taxes you pay to state or local municipalities are generally deductible.
- If you pay points to get a better interest rate on your home loan, you may be able to deduct the amount on your taxes the year you purchase the home. If you're refinancing, the deduction is typically divided over the life of the loan.
- Profits on the sale of your home are tax-free up to $250,000 for individuals ($500,000 for married couples). To enjoy this benefit, you must have lived in the home as your primary residence for at least two years.
Cheaper to rent?
Despite a recent rise in home prices, it is 44% cheaper to buy a home than to rent in most American cities.
Consult a tax advisor for more information on income taxes.