However, when it comes to your tax responsibilities, there’s good news and bad news.
The bad news is that your tax becomes a little more complicated, but the good news is that investing in property can actually save you money!
When you buy your first home it’s important to do research into the tax deductions you qualify for. In the long run, these tax breaks could save you thousands of hard-earned Dollars.
If you’re looking for a little tax help, learn more about the tax deductions you qualify for as a homeowner.
4 Homeowner Tax Deductions You Need to Know
In order to take full advantage of the tax breaks offered to you as a homeowner, you will need to itemize your deductions and become familiar with two forms:
- Form 1040
- Schedule A
No matter the type of home you purchase – whether it’s a large plot, small townhouse or single-family property, you qualify for the following tax deductions:
1. Mortgage Interest Deduction
This is usually one of the biggest tax breaks you can qualify for!
As a homeowner you will pay interest on your mortgage, and with this tax break you can claim back for this interest you’ve paid. In the early years of your mortgage payment, a large chunk of your home repayment goes towards interest.
The good news is that you can deduct all the interest you have paid, unless your mortgage loan is greater than $1 million. This tax deduction also qualifies for interest paid on a loan to buy your home or a home equity line of credit.
A little tax help tip?
You must fill out these deductions on Form 1040, in the Schedule A section, and then file the form.
2. PMI Premium Deductions
PMI stands for Private Mortgage Insurance, and you will be required to pay this if you put a down payment of less than 20% on your home.
This insurance is used to protect your lender in the event you can no longer make your mortgage payments. The only catch? PMI premiums can only be tax deducted if your mortgage was issued after 2006.
However, the amount of PMI premiums you can deduct is limitless, but dependent on your monthly income.
3. Tax Free Home Sale Profits
If there was one tax help tip we could offer, it’s understanding that the profit you make on selling your home is tax free!
That’s right, free from federal tax – but dependent on certain criteria.
There are two general categories: married and single.
Married couples can earn up to $500,000 on the sale of a home, while single owners can earn up to $250,000, without paying a dime in tax.
The only thing to look out for? You are required to have owned and occupied your home for at least 2 of the past 5 five years.
4. Deductible Real Estate Taxes
Most households spend over $2000 on real estate taxes each year – a great tax help is the fact that this expense is deductible.
The amount deductible is dependent on where you live, the value of your home and your income earning bracket.
It’s important to remember to itemize these deductions when filing your tax return in order to qualify for this tax deduction!
Maximize Your Real Estate Investment with These Tax Help Tips
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If you’re looking to maximize your real estate investment, get in touch with us today.