5 Fabulous Tax Benefits For Homeowners

Did you know the government still allows tax benefits for homeowners? It’s true! If you’ve been on the fence about taking the plunge into home ownership, there’s no better time than now to jump in.

Of course, never knowing what Washington D.C. has brewing, you shouldn’t tarry. Make 2017 and 2018 your year for home ownership. Enjoy the same tax benefits for homeowners as millions of other homeowners!

Mortgage Interest

When you buy a home, the first few years of mortgage payments are heavy with interest. Because of the way amortization works when payments are spread out over many years, you’ll pay much more interest when your loan begins. That means you’re eligible to deduct those interest payments from your annual taxes. Married couples can deduct the interest for up to one million dollars in mortgage debt. Married filing single can deduct five hundred thousand each.

Depending on your annual income you may also be able to deduct private mortgage insurance that was required by your lender. The IRS has more information on this in their Publication 936, Home Mortgage Interest Deduction.

Mortgage Points

Points are fees that you pay to the lender at closing in exchange for a lower interest rate. One point is equal to one percent of the loan amount. Borrowers can pay zero to four points, depending on how much they want to reduce their interest rate. You can deduct these from your taxes. In fact, if you’re an ace negotiator and convince the seller to pay the points at closing, you can still deduct those points from your taxes. The IRS has ruled that even if the points were paid by the seller, the borrower can still deduct them!

You can deduct points paid when you refinance, too, but you can’t deduct the full amount in the year that you pay them. You will need to allocate them over the life of the loan, so if you obtained a 15-year loan, you’d have to divide the total points paid by 15 and then deduct that amount annually. If you pay off the refinance, you can deduct any remaining points from that year’s taxes.

Property Taxes

Real estate taxes are only deductible in the year they were actually paid, but the IRS allows you to deduct both state and local property taxes. Most lenders collect property taxes along with your monthly mortgage payment and set the taxes aside in an escrow account. When the local taxes are due, the lender pays from this account. If you would like to include this deduction, ask your mortgage company for an escrow statement that shows what you paid in the year for which you’re filing taxes.

Renewable Energy

Additional tax benefits for homeowners include improvements you’ve made to increase energy efficiency. If you installed solar panels, fuel cells, or wind cells and other equipment that uses renewable energy to supply power to your home, you may qualify for a Residential Energy Efficient Property Credit. You qualify if the equipment was put into service before the end of December 2016, but the credit for qualified solar electric and solar water heating have been extended through the end of 2021.

Interest on Second Mortgages

If you have more than one mortgage on your home, you can deduct the interest you paid on it, too.

Additional Tax Benefits for Homeowners

• Many states allow tax credits for the installation of energy-efficient windows and doors and added insulation.
• If you’ve remodeled your home to make it handicap-accessible, you may qualify for tax credits.
• The IRS understands that saving for a down payment on a home and paying for closing costs can cause a financial burden. For this reason, you’re allowed to make an early withdrawal from your IRA. The limit is $10,000, but you won’t be penalized for an early withdrawal. This benefit does not apply to 401K account holders.

Buying A Home Never Looked So Good!

With all theses tax benefits for homeowners, what’s stopping you? Contact your favorite realtor today to find your perfect home. And then contact your accountant to research all these fabulous benefits!