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Home Ownership Tax Advantages

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By : Sonia Smith    99 or more times read
Home ownership is the greatest American dream. Furthermore, there are also advantages of owning a home. A homeowner pays the mortgage interest as well as property taxes while a renter or tenant pays the rent.

However, a tenant or renter pays a certain sum to allow the landlord to pay both the interest and the tax, thus he or she pays these fees indirectly. IN line with this, the homeowner has more advantages than the renter does as long as the homeowners exemptions, income and other deductions are the same as that of the renter, in which he or she pays lower taxes.

The tax benefit of owning a home was a rooted concept during the 70s and 80s and had considerable value. The rates of mortgage were typically double digits and the marginal tax rates reaching as high as 70 percent and deductions down into thousands. Home ownership made more sense even for moderate-income families.

Some of the advantages of home ownership include privacy, value of investment and tax benefits. One the biggest tax advantages of owning a property are the interest of mortgage is deductible. As you know, a portion of your monthly mortgage payment includes an interest paid to your mortgage lender. After every first of every year, your lender sends out a statement of your total paid interest rate of the previous year and this amount is deductible up to a maximum of $1 million if taxes are jointly filed.

In case you have an FHA loan that requires payment to a PMI or private mortgage insurance, you may write off a portion of it on your yearly taxes, which will depend on your income. Mortgage points are those usually paid to a lender at closing to lessen the amount of interest paid on the loan, tax deductible as long as the home remains your primary residence.

One point is a percentage of the loan amount and you could pay from 1 up to 3 points during escrow. While you could end up paying $3,000 to $9,000 in points on a home worth $300,000, the amount you pay will considerably lessen your tax dues.

If you are paying your taxes several times every year, it may be deducted from your taxable income. Nevertheless, if you have an office in your home or use a portion of your home for business, you may write off some of the living space, a portion of the space insurance and the costs of repair as well. Nonetheless, before making an office deduction, consult your tax advisor first since there are stringent rules about this that could possibly increase the chances of being audited.

If you decide to sell your home and do upgrades, you could deduct some of the expenses associated with selling it such as title insurance, costs of advertising, inspection costs, title insurance and the real estate agentís commission, which are all tax deductible.

The standard deductions could exceed $11,000, interest rates are down to 5 percent and the marginal tax rates of 38 percent, but considerably lowers for most families.
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