What Are the Basic Tax Advantages of Buying A Home? Fridays with Fred

Real Estate Agent with Fred Sed Group ~ Your Premier Southern California Realtors CA BRE #01423187

For most homebuyers, they know that when they purchase a home it essentially acts as a forced savings plan because a percentage of their payment goes towards paying down the principal amount of their mortgage each month as they build wealth over time.

What about the tax advantages that come with buying a home? In this article, we will break down some of the tax advantages that homeowners enjoy.

Tax Advantages of Buying A Home 

Let’s say that you plan on buying a home in Southern California that’s valued at $500,000, and you plan on using $25,000 as your down payment, this means that you’re getting a loan for $475,000.

If your interest rate is 4%, during the first 12 months of paying your principal and interest payments, $8,000 will go towards your principal while $18,000 will go towards paying interest. 

Let’s say that you are in the 20% income tax bracket, 20% of $18,000 is roughly $4,500. This is the income tax cash savings (refund) that you could expect to receive when you file your income taxes after living in your home for one year.

Seeing the Bigger Picture of Owning A Home

Yes, owning a home is a great way to provide your family with a great place to live while building wealth over time but the tax incentives of homeownership are certainly a very important aspect of owning a home.

Besides receiving a credit for the amount of money that you paid on the principal of your mortgage loan, you can also deduct up to $10,000 that you paid in property taxes. 

In many cases, you may also be able to deduct points that you paid on your mortgage loan (if you paid money directly to the lender). 

You could also qualify for more tax credits if you plan on making energy-efficient upgrades to your home.

It’s also possible that you may be able to qualify for tax credits if you plan on staying in your home as you grow older (age in place). Some of the tax credits you could expect to receive include credits for adding a wheelchair ramp to your home or safety features to your bathroom so you can use your bathroom safely as you grow older without fear of falling. 

Contact the Fred Sed Group

To learn more about the tax advantage of buying a home, or to search for homes for sale in Southern California, contact us today by calling (800) 921-9231 or connect with us online


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Hella M. Rothwell, Broker/Realtor®
Carmel by the Sea, CA
Rothwell Realty Inc. CA#01968433 Carmel-by-the-Sea

And all these tax credits when you purchase a home, rather than paying rent and owning zip, and no tax credits.

Sep 13, 2019 09:15 AM #1
Susan Hale
Re/Max Realty of Defiance,Inc. - Defiance, OH
Re/Max Northwest Ohio Realtor

In our rural neck of the woods it is so easy to purchase a home.  The USDA loan requires "0" down payment.  Wish this type home loan had been available when I wanted to purchase a first home in the 70's.  Back then it was 20% down period.

Today finding many younger potential homebuyers having qualifying credit issues though.  They want to buy the best of everything right away charging up their credit card accounts, buying the latest model expensive cars,etc and then either their debt ratio is too high or they screwed up their credit with late payments. 

I can't imagine why anyone these days wanting to rent when there are 3.5% down FHA loans, 5%down conventional loans or the USDA loans I mentioned.  The landlords are getting rich, paying off their rental mortgages with the tenants rent payments and purchasing more rentals.  I realize there are issues of landlords having nasty tenants that damage the rentals, don't pay rent on time or having to do evictions.  On the other hand there could be tenants having slum landlords not doing repairs.   

Best to be your own homeowner as soon as possible, make payments on time and learn pride of home ownership, earning equity by maintaining your homes AND working with a great Realtor when you make a real estate change:-) 

Sep 13, 2019 09:45 AM #2
Fred Sed
Fred Sed Group ~ Your Premier Southern California Realtors - Irvine, CA
Your Orange County Realtor, Why? Because Fred Sed

Great points ladies. Thank you!

Sep 13, 2019 12:52 PM #3
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