The tax deadline is upon us. That means it’s a good time to talk about the tax benefits of owning a home. In addition to the pride of being a homeowner and the long-term investment potential of the home’s rising equity, the tax benefits of your mortgage are also very attractive.
Disclaimer: I am not a licensed accountant so these are simply general considerations that are available for many or most, but may or may not apply to an individual specifically depending on certain other consideration. You will always want to consult your CPA to see what tax benefits are available to you.
Let’s take a look at a few of the best tax benefits related to your home’s mortgage:
1. Mortgage Interest
This is obviously the most important tax benefit. You are able to deduct interest paid on your mortgage (for a value up to $1 million in original mortgage principal). It can be deducted for multiple homes you own (up until you exceed that million dollar threshold). You will need to itemize your deductions to claim mortgage interest, though. It is also important to know that the more recent you purchased or refinanced your home, the more mortgage interest you will have paid since the early years of any mortgage loan will have you paying more interest compared to the principal.
2. Mortgage Insurance (PMI)
Anyone who puts less than 20% down on their home may be paying mortgage insurance. And if you are, be sure to explore this, as those extra PMI fees are deductible up to a certain point, depending on your adjusted gross income.
3. Discount Points
If you paid discount point fees to obtain a lower interest rate on your mortgage loan, the points you pay can usually be deducted that same year.
4. Property Taxes
Whether you have a mortgage or your home is paid in full, you will be paying annual property taxes. Property taxes can be deducted, though you will again need to itemize your deductions in order to claim them.
5. Home Office Expenses
If you use part of your home exclusively for business purposes, be sure and keep detailed records and receipts of business-related expenses. Consult with your tax preparer about what can be deducted and how much you can claim.
6. Moving Expenses
If you relocated for your job, you may be eligible to deduct moving expenses. The IRS has specific requirements, so again it is best you consult with a tax expert to find out what you can deduct.
When it comes to preparing your tax returns, owning a home offers many additional benefits to consider. It is important you understand what you are eligible to deduct and how to go about itemizing your deductions properly. For more information about owning a home or the tax benefits of a mortgage loan, contact Transparent Mortgage today.