There are several benefits you can enjoy when you become the owner of a house, including ways you can use the costs of your home as a tax deduction.
Most of the time, your realtor will point out these types of benefits to new home buyers, especially if they are first-time buyers.
Read on to find out the best tax benefits available to you if you are a homeowner.
Interest On Your Mortgage
If the mortgage on your home is less than $750,000, you can deduct the interest you pay on the loan from your taxes. This is one of the main benefits of owning a home over renting your living space.
If you bought a house before December 15, 2017, the limit rises to $1,000,000.
You can also deduct the interest you paid on the home closing.
Even with the new TCJA rules, you can still deduct some of your property tax as part of the benefits of owning a home. You can deduct up to $10,000 of the total amount of your property tax on all of your properties.
This new rule will apply until 2026, but if it is not extended, it will go back to the way it was before 2017. If you paid the property taxes directly to the municipality you live in, you need to keep the records yourself.
Tax Deduction For Points
This is only applicable if you paid mortgage points to the lender at the time you got your mortgage from the lender. If you paid money to the lender for those points, you can use that amount as a tax deduction.
According to the IRS, you can deduct points paid only over the lifetime of a new mortgage. If you use part of the refinanced proceeds to improve your main house, you can deduct it in the same year you paid for it.
Private Mortgage Insurance
This is a fee you will pay if you paid less than 20% of the value of the new home as the down payment. If you applied for the mortgage after 2007, you can claim the tax deduction for private mortgage insurance.
You can only claim this if your adjusted gross income is $100,000 or less for a married couple. For a single person, you should have an income of $50,000 or less to be eligible to claim with the current tax law.
Benefits When Selling
If you decide to sell your house at some point to buy another one, there are also some tax benefits involved for you. This will benefit you if you have lived in your main home for more than two years but less than five.
If you are married, you can be excluded from paying taxes on profits made of up to $500,000. Single people can be excluded for up to $250,000 in profits made on the selling of their primary residence.
Even though most of the benefits of home upgrades are gone, you can still claim deductions on solar energy upgrades. You should claim as soon as you make the upgrades for optimum benefits.
As you can see, there are a lot of great tax benefits if you decide to invest in buying a home in the near future. You should also research on your own to see if there are more benefits for people who own more than one property.