Owning a home is an American dream. A home is where you raise a family, gather with friends, and for many couples, grow old together. In addition to the pride one receives from home ownership, they also receive many tax deductions.
If you would like to know how to fulfill your dreams of homeownership while saving money on taxes, please keep reading. If you owe back taxes, or have questions about tax resolution services, it is critical that you contact a tax resolution specialist today. Companies like U.S. Tax Shield can help.
Tax Deduction #1: Mortgage Interest
Did you know that you are allowed to deduct interest paid on your mortgage from your taxes? Such deductions are limited of course, but if you are married and filing jointly, you can deduct all of your interest payments up to a maximum of $1 million in mortgage debt from a first or second home. These maximums are cut in half if you are married but filing separately.
Tax Deduction #2: Equity Loan Interest
If you have a home equity loan or line of credit, you may be able to deduct some of the interest paid on that loan. It is important to know that the IRS limits the quantity of debt for each deduction that you can call “home equity.”
The total sum of debt is restricted to the lesser of the following:
A total debt of $100,000 for couples filing jointly and $50,000 for individuals filing separately, or your home’s fair market value (determined by the value of your home minus the debts on the home).
Tax Deduction #3: Points
One of the fees a lender charges you is called a point. One point is equivalent to 1% of the principal on the loan. Typically a home loan has one to three points, which amounts to thousands of dollars. Homeowners can receive tax deductions related to a home mortgage. Additionally, mortgage points on a refinanced home are also tax deductible.
Tax Deduction #4: Property Taxes
Property taxes, also know as “real estate taxes,” can be fully deducted from your annual income. It is important to note that you cannot deduct escrow funds you keep in an account for property taxes until you use the funds to pay your property taxes.
Tax Deduction #5: Save on Selling Costs
Are you thinking about selling your home? If so, you will be able to minimize taxable capital gain by the amount of the home’s selling costs.
Tax Deduction #6: Mortgage Tax Credit
If you are a first-time homebuyer with a low income, you may be eligible for a program called mortgage credit certificate (MCC). This program permits qualified buyers for a mortgage interest tax credit of 20% of the mortgage interest payments made on a home. The maximum credit is $2,000 per year, if the credit rate exceeds 20%.
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