There may be many possible tax advantages for owning a home through use of tax deductions. Deductions reduce your taxable income and therefore lead to fewer taxes. It is useful to learn the tax impact before purchasing or when comparing renting vs. buying. This article provides details on Amesbury MA possible tax advantages for owning a home.
Tax Deduction Requirements
Not all home owners can claim tax deductions. When completing your taxes, you can apply the standard deduction or itemized deductions, whichever results in lower taxes. If you purchase a low priced home, the deductible figures may not add up to more than the standard deduction. Other financial variables could affect this as well. Only an accountant can give you a true evaluation of the tax affects of owning a property taking into account your personal situation.
Deductible Home Expenses
Only the interest portion of your loan payment is tax deductible. In the first few years of having a home, you spend more on interest than anything else. Therefore, the total deductible interest is higher when you first own a home than in subsequent years. Your loan provider will mail you a statement each year outlining the mortgage interest paid on your home.
Real Estate Taxes
Real estate property taxes can also be tax deductible. Real estate taxes are an annual figure but are normally due in quarterly increments. These taxes can be included in your mortgage monthly payment, but be sure to keep copies of the property tax bills sent directly to you. The figure in mortgage statements may not encompass the full calendar year.
If you bought your property within a designated time frame and if you are within a specified income range, you may be able to deduct mortgage insurance payments. MI is invoiced on a monthly basis for loans more than 80% of the home value and does not get removed until the loan balance decreases to the 80% level.
Points and Other Charges
Consider keeping a copy of your closing settlement statement. A variety of charges such as points, adjusted real estate taxes, and pre-paid interest may be deductible. Furnish the paperwork to your tax preparer.
The above is details on Amesbury MA possible tax advantages for owning a home and applies to primary residences. If you own investment property, the variety deductions may not be the same. The above is meant strictly as a generic overview. Always ask a tax professional for expert advice tailored to your financial situation or to your type of residence.