People talk a lot about the pride of homeownership. While there is an emotional side to owning a home, there are also some financial benefits. Specifically, there are several tax advantages that homeowners can enjoy that renters cannot. Learn at least five tax benefits that you may be able to take advantage of as a homeowner:
Mortgage Fee Deductions
Each time you get a mortgage to purchase or refinance a home there are fees involved. While some of these are sunk costs, others are deductible costs. You can typically write off mortgage fees, such as:
- Prepaid interest
- Origination fees
- Loan discount fees
You should consult with your accountant prior to deducting any points or fees, but these are the fees that are generally tax deductible.
Once a year when your tax bill shows up in the mail, it may cause you to cringe. Some get especially frustrated when they see how much the school taxes are when they don’t have any kids in the county school system! The good news is that you can deduct your property taxes from your federal tax returns. This is an annual deduction for each year that you live in the home.
Generally, you can also write off the entire interest portion of your home loan payment on your taxes as well. A typical 15- or 30-year fixed rate mortgage is mostly interest for about the first half of the mortgage term anyway, so you are truly maximizing your tax deduction during those years.
[Mortgage Help: Get your free credit report and see if your credit score is mortgage qualified]Private Mortgage Insurance
Some lenders will allow borrowers to put less than a 20 percent down payment on a home purchase. However, when a lender finances more than 80 percent of the purchase price of the home, it typically requires private mortgage insurance, also known as PMI. Private mortgage insurance usually remains part of your home loan payment until you pay down the mortgage so that it is only 80 percent of the value of the home. While PMI is not typically expensive, it is also a payment that is tax deductible.
When you sell your home, you also have the right to deduct some of the costs. Some of the selling costs you can typically deduct include:
- Real estate agent commissions
- Title insurance
- Legal fees
- Administrative costs
- Inspection fees
- Repair and redecorating costs 90 days leading up to the sale
While there is a lot of pride involved in being a homeowner, there are also some added financial bonuses. Owning your home allows you to make multiple tax deductions, depending on your situation. Some are one-time deductions, while others are ongoing ones. Now you can look at being a homeowner as both an emotional and financial investment.
Learn other ways to be a smart homeowner with helpful tips and tools from Quizzle.com. At Quizzle, you can find out if you can save money on your monthly mortgage payment and improve your credit so you qualify for the best mortgage rates.