In some places, the real estate market is definitely working in the buyer’s favor right now and if you happen to have the extra cash and are looking to settle down a bit, then now might be the perfect time. Plus you can get a tax break for buying a house.
You heard me correctly, not only do you get a chance to have a place to call your own that you can change to fit your personal preferences, but you also get a bit of a break on your taxes. Not something you get with rent. So, let’s talk about the different tax breaks that you might be eligible for.
But, before we get started, I’m not a tax expert and your situation might dictate your incentives differently than the common ones I’ve researched. So, definitely make sure to chat with your personal financial advisor before making that house purchase.
What Is the Tax Break for Buying a House?
There are a few tax benefits that come into play when you buy a home. Which while not providing direct “cash” into your pocket, can make your financial life much easier. They include:
Home Mortgage Interest Deduction
Many people making mortgage payments get a bit of a break on them because they can be used as a deduction. There are a few cases where this isn’t the case, plus there’s a $1-million yearly cap. But, at the end of the day, this is a great tax break for buying a house.
Private Mortgage Insurance Payments
It’s possible that you might be able to deduct private mortgage insurance payments from your taxes, making your taxes a little lighter. But you need to have taken out a loan in 2007 or later, plus you need to meet their adjusted gross income limit. For single individuals it’s $50,000 or less, for couples $100,000.
Real Estate Taxes
Not only is your mortgage payment deductible, but you might also be eligible to deduct your property taxes. You’ll need records for this?—either in the form of receipts or transfers or through a 1098 form if you pay them through a lender escrow account. This can be another really great tax break for buying a house that you can benefit from.
It’s possible that you paid “points” to a lender for a new or refinanced loan, which typically cost a percentage of the total loan. Likewise, if you refinanced or took out a home equity line of credit you’ll like have some points to work with that have been built into the loan. This could be a great tax break for buying a house, make sure to talk to your financial professional about how the dtails work out.
Possible Tax Credits
Sadly none of the above are actually tax credits, however there are a few that new homeowners could be eligible for a few different ones, including a federal credit of 30 percent for making your home greener.
Plus, different states have different tax credits and incentives, so definitely check in with your financial advisor or accountant so that you maximize the benefits of your brand new purchase.
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