3 Potential Tax Benefits of Owning a Home
Oct 06, 2017 | First Time Homebuyer
Whether you’re a first-time homeowner or planning to move, buying a new home is an exciting process that presents many unique opportunities. Educate yourself on the tax deductions that might put some money back in your pocket: Additionally, it’s important to speak with your financial advisor or tax specialist to ensure you know exactly what can and cannot be deducted in your specific circumstances.
1. Mortgage Interest Deduction
One of the largest tax benefits of owning a home is the ability to deduct mortgage interest from your Federal Income Tax Return. Meaning, if you elect to itemize deductions on your federal return, you may be able to deduct the interest you pay on various mortgages of your primary residence.
While you can potentially claim a deduction for any interest that you have paid on mortgages (whether it be for building, purchasing a home, or even a mortgage taken for home improvement), not all interest paid towards a mortgage is tax deductible. As noted above, speak with your financial advisor or tax specialist to determine your own situation.
2. Property Tax Deduction
The higher your property taxes are, the larger the deduction you can take on your taxes.
It’s important to keep in mind that you must claim your deduction in the year you actually make your payments. For example: because property taxes are usually paid quarterly, you might pay your first quarter taxes for 2018 in December of 2017. If that were the case, you might take a deduction for that payment from your 2017 taxes. As noted above, speak with your financial advisor or tax specialist to determine your own situation.
3. Points Deduction
Points are an upfront fee that you pay your lender at closing to receive a reduced interest rate. Typically, one point is equal to 1% of your loan value.
If you decide to pay points on your mortgage, they maywork as a tax reduction. If the mortgage is on your primary home and the points you pay are in line with the industry standard, you may be allowed to take a full point deduction right away. Otherwise, you may still be able to take the deduction, but it will need to be spread out over the life of your loan.
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Tax benefits are just one of the many potential advantages of owning a home. Contact us today to discuss your unique needs and to see how Home Point Financial can help you make the most of the home buying process.