Buying a house is one of the largest purchases made within a lifetime. Along with the responsibility of owning a home comes some great perks, namely tax breaks and deductions. Knowing what these benefits are and getting a better understanding of them can help you take advantage of these perks during your homeowner journey.
Mortgage points
While earning points is great on the basketball court, it can be financially draining to a mortgage. Mortgage points are what buyers pay to lenders to secure a loan, usually given as percentage points of the total loan amount.
If you decide to pay these points during the closing of your home, then they are deductible. Taxpayers who itemize deductions on their IRS Form 1040 can usually deduct all the points they paid within the year, except for some high-income taxpayers whose itemized deductions are limited.
PMI costs
If you made a down payment of less than 20% on your home, odds are you may have to pay for private mortgage insurance until you pay off at least 20% of the loan balance.
The positive side is that homebuyers who bought their home in the year 2007 and after can deduct their PMI premiums. However, it’s best to make sure these deductibles are valid each year before filing your taxes.
Mortgage interest
Mortgage interest accounts for the largest tax deduction for most homeowners. When you receive the form 1098 from your lender, you can deduct the total amount of interest you’ve paid during the year.
Property taxes
Another deductible to not overlook is local property taxes. Consider saving the records for any property taxes you pay so that you can deduct them during tax season.
Home energy tax credits
Some states offer generous tax credits for homeowners who make home improvements to save energy. There are a number of improvements you might qualify for, including things like insulation and energy-efficient roofs as well as photovoltaic (PV) solar panels.
By keeping track of your mortgage payments and checking out your local credits, you can work with a tax expert to make the most out of your deductions during tax season.
About the Author
Debbie Caldwell
When you first meet Debbie Harris-Caldwell, you are immediately drawn to her charming Welsh accent and the twinkle in her eye. The well-traveled transplant from Wales is quick to set you at ease and time spent with her promises to be time well spent.
Debbie has been a real estate agent for 40 years and takes great pride in her customer service skills. "I make myself available to my customers when they need me, whether it's on a Sunday Evening or after their long day at work. I make my schedule fit theirs. I also keep my customers updated on everything happening with their listings or purchase, I am their conduit for information." She has built a business following her key principles of clear communication, attention to detail, client advocacy, and comprehensive knowledge of the area. Debbie comes to every new transaction with positive energy, determination, a strong understanding of the currents driving the market, and the expertise that comes from a lifetime of experience. She knows the importance of marketing and whether a home is for sale for $200,000 or for $2 million, she always has professional photography done and creates a listing presentation that best shows off her customer's home.