When a person reaches their mid-twenties quite often they are renting a place or possibly still living at home with relatives. One of the thoughts that many will have is whether they should buy a home or not.
The comparisons will start between renting a home and owning a home. For some folks, renting makes sense, for others it doesn’t.
Quite often people will ask what are the best home buying tax deductions you can take from owning a home. There are lots of people who do not realize just how many financial perks there are with home ownership.
Keep reading for all the home buying tax advantages vs continuing to rent. The tax advantages of owning a house can be substantial. If you would like to save yourself quite a bit of money study these tax resources for timely financial advice.
Step 1: Deduct Mortgage Interest
One of the best tax advantages of owning a home is the ability to deduct the mortgage interest. The interest you pay on a loan is most significant in the early years.
From a tax perspective, you will be able to deduct more interest after having just purchased a home.
It is not uncommon to be able to write off over ten thousand dollars in interest if you have a decent size mortgage balance.
Step 2: Deduct Real Estate Taxes
In many areas of the country, the taxes you pay the local city or town can be fairly significant. When you own a home you’ll be able to deduct these property taxes. This effectively brings down your tax bill by a significant amount of money. You get to take this tax deduction every year.
One important item to consider about real estate taxes is you can deduct them from more than one property. Do you own a second home? You will be able to deduct your property tax generated from your second home as well.
Step 3: Did You Pay Private Mortgage Insurance
If you bought your home with less than a twenty percent down payment, more than likely you are paying what is referred to as private mortgage insurance. PMI is a type of insurance that protects the lender from those who default on their loan.
Another tax advantage of owning a home is the fact you get to deduct the private mortgage insurance you are paying. This tax perk does not last forever, though.
You will only be paying PMI until you have around twenty percent equity in your home. In fact, many people ask how to stop paying private mortgage insurance. With good reason as this expense does not really benefit a homeowner in any way. It is really in the interest of the mortgage holder.
Step 4: Did You Pay Mortgage Points
Did you pay mortgage points when buying your home? If so you are in luck because points are also tax deductible!
A point is one percent of your loan amount. So if you borrowed two-hundred thousand, you would have paid the lender two-thousand dollars. You can deduct this fee on your taxes.
Step 5: Energy Efficient Upgrades
If you are like most people saving energy is probably one of your top considerations. Fortunately, the IRS agrees that improving the energy efficiency of our homes is a worthwhile thing to do.
Lately, one of the more popular energy efficient upgrades people are adding to their homes is solar power. Solar power can save you a significant amount of energy on a yearly basis. Unbelievably, you can also deduct for it on your taxes!
Just be sure you will be staying in your home for a while. Some people incorrectly assume that adding solar power increases a home’s value. This is not necessarily the case. If you need to move in a short period, you might find yourself on the short end of the stick.
Solar power is not the only thing you can deduct. There are many other major home improvements you can deduct on your taxes as well.
Step 6: Tax Exempt When Selling Too
There are not just tax perks when you first purchase a home and throughout your ownership. You can also shield profits from your home sale as well.
If you are single the IRS gives you a tax break on two-hundred and fifty thousand worth of profit when selling. If you are married your exemption goes up to five-hundred thousand!
Not bad right? As you can see there are quite a few tax breaks for owning a home. Surely enough to think twice about continuing to rent instead of building equity.
There are many Tax advantages on buying a home! If you are ready to buy a home so that you can use these tax advantages for next tax season then call us today! If Your Buyin…. Call Rhyan!! 757-255-8289
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