There can be many common tax deductions for buying real estate. Deductions lower your taxable income and therefore result in lower taxes owed. It is important to learn the tax advantages prior to buying a home or if weighing renting vs. owning. This article includes information on common tax deductions for buying real estate in Virginia.
Tax Deduction Criteria
Not everyone is eligible for common tax deductions for buying real estate in Virginia. When completing taxes, you may opt for the standard deduction or itemized deductions, based on which is higher. If you purchase a low priced property, the deductible figures might not add up to higher than the standard deduction. Other personal figures could factor in too. A tax consultant will provide a better understanding of the tax benefits of buying a residence by reviewing your personal finances.
Usable Home Costs
Only the interest portion of your home loan payment is tax deductible. In the early years of home ownership, you pay more towards interest than anything else. Therefore, the amount of paid towards interest is a larger figure in those first few years. Your loan provider will send you a tax form every year totaling the total interest paid.
Property taxes are also be tax deductible. Municpal taxes are an annual figure but are usually billed in quarterly time frames. These taxes are often part of your mortgage monthly payment, but hold on to copies of the tax statements sent directly to you. The figure in mortgage statements may not encompass the total amount, especially if you purchased the property mid-year.
If you first purchased your residence within a designated period of time and if you are part of a certain income range, you may be able to deduct mortgage insurance payments. Mortgage insurance is typically due at closing and on every mortgage payment for mortgages more than 80% of the selling price and does not get removed until the balance drops below the 78% level.
Be sure to retain the original of your closing statement. Some fees such as points, property taxes, and pre-paid interest may be important. Provide the information to your tax advisor.
Common Tax Deductions For Buying Real Estate In Virginia
The above common tax deductions for buying real estate in Virginia is applicable to primary residences. If you have investment property, the possible deductions will be different. This is shared strictly as a general overview. Be sure to speak with a tax advisor for solid guidance specific to your financial profile.