Owning a home has become synonymous with building wealth.
For most Americans, it’s one of, if not the largest investment they will make over the course of their life. Many financial experts agree that it’s the single best way to grow your “nest egg” over time.
Of course, please do contact your tax advisor or CPA to talk about the specifics of how the tax laws apply to you and your circumstances. Make sure you are eligible for these individual deductions!
Home-owners are allowed to deduct the interest of your monthly mortgage payment. Best of all, it’s available for the entire term of the loan! There are new limits on the amount that can be deducted, but the average home owner will not even get near that number.
Home Office Deduction
If you work out of your house, your home office can provide additional tax deductions annually. Homeowners who have an office in their home are actually allowed to deduct the amount of monthly mortgage paid based on the square footage of that office. They can even expense a portion of the utility bills, including heat, electricity, and internet service.
Part of being a homeowner means that you are subject to property taxes. Those are paid to the county, city and state – and are tax deductible. Again, new laws limit the amount that can be deducted, so contact your advisor for the specifics.
If you are required to relocate for work, there are specific deductions available for expenses connected with moving your family, your things, and even your cars.
If you utilized “points” to lower the interest rate of your loan, you can actually deduct the cost of those fees the year you purchase the property. This happens quite often – say a borrower uses 1 point to lower their interest rate from 5% to 4.75%. This would lower their monthly payment over the life of the loan AND help you in the tax year you make that purchase.
Mortgage Interest Credit
If your income meets certain thresholds, you might be eligible for the mortgage interest tax credit. It’s there to make paying for your new home a bit easier – but you do have to have a mortgage credit certificate. Those can be provided by the state or local government agency.
There are other potential deductions for environmental and health related home improvements out there too, so make sure you contact your CPA or tax advisor to find out more!