Tax Benefits of Home Ownership
Everyone knows that owning a home is the American dream, but did you know that borrowing to pay for one is a taxpayer’s dream? That’s because home mortgage interest is deductible on your income taxes if you itemize. You can deduct the interest on up to one million dollars of home mortgage debt (whether it is used to purchase a first, or a second home) as well as any property taxes associated with the home.
So how does it work? As long as your home-related deductions (plus other itemized deductions) add up to more than the standard deduction for your filing status, you should be able to save some money on your annual income tax bill. Most home owners find that their home is their biggest single deduction and experience significant tax savings. This is one of the reasons why homeownership is such a great investment and a key step towards building wealth.
Whether you’re eligible for all or some of these deductions depends largely on your filing status, your taxable income, and your itemized deductions. Speak with your tax advisor for information specific to you.
Home-related tax deductions may include:
- Mortgage interest. (Can deduct yearly.)
- Property taxes. (Can deduct yearly.)
- Points paid at closing (either by you or by the seller). (Are fully deducted for the year you buy your home.)
For additional information on this topic read the Tax Benefits of Homeownership. Your tax advisor can provide additional information about the tax ramifications of home ownership.
