The Top Tax Benefits of Homeownership
Hello, Tax Season. We’re back, as we are every year. Now that we’ve passed through the gauntlet of April 14 (which landed on April 15 this year), it’s time to talk about all the ways we can pay fewer taxes next year. Though we have a
bit of time to prepare, it never hurts to start early. So why not take a peek right now at what a homeowner can expect?
So, maybe you finally bought a house this year and you had the chance to write off the standard home related expenses already. Is that you? Well done, it’s kind of satisfying to hit all those #adulting milestones.
But if you haven’t made that major purchase yet and you’re thinking about taking the leap into the realm of homeownership over the next year, there are multiple reasons it can be a wise move when it comes to easing the pain of how much you
owe Uncle Sam. Even better, maybe buying a home will enhance that tax return you definitely deserve. Knowing the details can maximize your potential and increase the purpose of homeownership.
Write Off Mortgage Interest
The biggest factor that most people consider when it comes to how it can positively impact your taxes is the mortgage interest deduction. This is the amount you pay over the course of a year toward the interest on your home loan. For homes bought in and
after tax year 2018, you can deduct the interest on up to $750,000 of debt used to acquire (or improve) your home. Prior to December 15, 2017, the amount was $1 million—all that means is simply that the landscape of tax breaks has changed slightly.
But it is still a major boon when it comes to figuring out how homeownership can affect your finances.
Write Off Property Tax
Another major beneficial influence on how your taxes wash out due to homeownership is your property tax. These days (post Trump tax plan), the cap on how much you can deduct from your taxable income is $10,000. But that’s still a helpful amount.
Consider it this way, if you pay $4,000 on property tax, you may reduce your taxable income by that amount, which lowers how much you’ll pay in federal taxes for the year.
Making the leap from renting to homeownership is a major milestone, and though it can be daunting, there are many benefits that increase how attractive it is. If this is the year for you to tackle a new phase in your life, we’re here to help.
Please consult a tax professional about your specific situation and the tax savings benefits of homeownership.