TAX PERKS IN PURCHASING YOUR OWN HOME
It is true that taxes and homebuying can be tedious. The two can be painful to face. Many people shy away from it, but did you know that there are tax perks behind it? The key words are “tax deductions”. When you buy a home, you can expect a significant amount of money to return to your wallet. Below are the sources of extra money when you become a homeowner:
Deduction from your own office. If you work from home as a self-employed or a freelance professional, you are entitled to a home office deduction. This can save you a lot of money when it comes to your taxes. When you conduct your business from your home, the IRS allows you to deduct part of your expenses (such as internet service, electricity, and water) that help you with your home-based work. You can qualify for this type of deduction if your home office has a dedicated room or space inside your home. This area of your house should just be used for work or business. Though IRS doesn’t usually make home visits to check this, just be honest about it.
Deduction from property tax. On average, an American household pays a little over 2,000 USD annually in property taxes. If you live in Vermont, New Jersey, and New Hampshire, your property taxes are the most expensive. The tax advantage in paying higher property taxes is that you can have larger tax deductions. Just make certain that you claim those deductions the same year you make your tax payments.
Deduction from the mortgage interest. Mortgage interest deduction is known as one of the biggest tax breaks you can ever get as a full-fledged homeowner. You can write off interest up to about 500,000 USD as a single homeowner or 1,000,000 USD if you file jointly with your spouse. You will find that tax deductions can be lucrative in the first years of your mortgage payments. During these first years, your monthly mortgage payments are applied to the interest and not to the principal of your loan.
Deduction from PMI. The Private Mortgage Insurance (PMI) could have hit you if you weren’t able to pay the 20% down payment for your home. PMI usually amounts to 1,000 USD to 2,000 USD. This can be tax deductible if you have an income that is only up to 109,000 USD as a couple or 54,000 USD as a single filer.
Consider buying your first home and be familiar with the perks. The U.S. government can be considerate when it comes to helping you save money as you go through your mortgage. Because of this, taxes and homebuying don’t need to be that stressful at all.
Cliff Johnson/Real Estate Agent