Tax benefits are one of the perks that come along with buying a house. Home ownership has a plethora benefits over renting, but the ample tax breaks that you receive when you purchase a property for sale are substantial. Here are just a few perks of being a homeowner:
● A large portion of monthly loan payments goes towards taxes, they go into something called an escrow account. The payment is made annually. You get property tax deductions when you pay real estate property taxes on your primary residence as well as a vacation home.
● You get a hefty mortgage deduction thanks to the U.S. tax code. This allows homeowners to deduct the interest paid on their mortgage from their taxes. This is one of the biggest tax breaks that you can receive, for most homeowners, a sizeable chunk of payment you make goes towards interest. Luckily all of that interest is tax deductible.
● Private Mortgage Insurance. If you are unable to make the downpayment of 20% for the property for sale you will most likely have to get Private Mortgage Insurance, PMI. Some, if not all of the Private Mortgage Insurance premiums can be deductible. However, you will be unable to qualify for this deduction if your annual adjusted gross income exceeds $54,000 or $109,000 if married and filing jointly.
● Points. When you buy a house you might have to pay points to the mortgage lender in order to obtain the loan. This expense is normally a percentage of the loan amount. The IRS allows you to deduct points the same year that you pay them if the loan is used to build or purchase your primary residence. Double check to make sure that your loan meets all the prerequisites so you may deduct the points at once.
● Owning a home builds wealth. It allows you to build equity, equity is built over time by making your mortgage payments. Improvements made to the home also increase this equity as well. When you build equity you are increasing the amount of money that your house can be sold for once you subtract whatever amount is owed on the loan. Every single month that you make a mortgage payment, a chunk of this goes to reducing the amount of money left that you owe on the loan.This monthly reduction slowly but surely builds more equity over time.
● Buying a home helps protect against inflation. When you have a fixed mortgage rate, the amount of money that you pay every month on your home is the same. If interest rates skyrocket and inflation raises the price of everything, one of the few things that will stay the same is your mortgage payment. So if and when inflation increases the cost of groceries and rent, your monthly mortgage payment will stay the same.
Homeownership is an investment! People will try to argue with you and tell you otherwise, but buying a home is one of the safest investments that you can make today. Look at the real estate listings. Buying a house is a lot cheaper than it ever has been, but slowly and steadily it is starting to rise. This growth will continue for the foreseeable future and if you purchase a house for sale now, over the course of time your home/investment will rise. So if and when the time comes to sell, you will see a healthy return on your investment from higher housing costs. If you do not wish to sell, you can always rent your house out for extra monthly income if you should choose to buy another house.