Owning a home comes with several perks and benefits. One of these is tax benefits. Many new homeowners want to learn more about the tax benefits they will see. For those who have this question, keep reading. Being informed is best when it comes to owning a home and taxes.
1. Mortgage Loan Interest Deduction
One of the first tax benefits that a CPA Firm will discuss with new homeowners is the mortgage loan interest deduction. While things are still evolving with this category, it is possible to deduct the total amount of interest being paid with the mortgage loan, with some limits. A person may not be able to deduct all the interest on some properties in some cases, which is why it is a good idea to talk to a CPA to find out what is and is not deductible.
2. Mortgage Insurance Premiums
It does not matter if someone is paying to cover their home, car, or something else, insurance is not something people like to pay. Usually, mortgage insurance will be required by a lender if a homeowner does not have at least 20% equity in their home. The insurance is designed to provide coverage for the lender if the homeowner defaults on their loan.
3. Closing Costs and Points
The points someone paid when they refinanced or purchased their home the following year may also be deductible. The reason for this is that points, which are often called loan discount points, are usually paid to prepay the mortgage interest. Because interest is deductible, points may be too.
Along with points, there are other closing costs that could be tax-deductible, as well. However, make sure to stay aware that not all related closing costs are considered deductible.
4. Real Estate Taxes
Usually, it is possible to deduct real estate taxes if a person pays taxes at the time they close or to a tax authority like the city or county tax assessor’s office. It is possible to deduct the property taxes on a person’s main residence, a foreign property, or a second home. However, it should be noted that there are some caps and limits to what can be deducted.
5. Home Office Costs
If a person’s home is also their main place of business, it may be possible to deduct related expenses. While it is possible to take this deduction, make sure to be careful when doing this. If the deductions in this area are too big, they may trigger an audit by the IRS.
In most cases, the best way to determine a home office deduction is with the percentage of the home that is devoted to the office space. Some of the deductible home office expenses include utilities, depreciation, repairs, insurance, real estate taxes, and mortgage interest.
Work with an Accountant to Learn More
When it comes to saving money on taxes with a home purchase, it is a good idea to keep the information here in mind. Doing so is going to help ensure that the desired results are achieved and that a new homeowner is saving as much money as possible on their tax liabilities. In the end, knowing what is and is not deductible is key to ensuring that the desired amount is saved and that the tax debt is reduced for a homeowner.