It’s getting close to tax time and every American is looking for ways to cut their tax bill. Home ownership is a great way to reduce the amount of taxesÂ you owe each year. There are several tax benefits that are allowed by the government to help you save some extra money at tax season.
First, you get a tax break for if you have paid any points toward closing costs. There are many fees you must pay at the time you close a home mortgage and one of these is sometimes points. You pay point fees to help lower the interest rate of your loan. It’s not a mandatory fee but can help reduce your monthly payment and the amount of interest you pay. Any points you pay toward a home purchase, refinance, or home equity loan are tax deductible.
Second,Â you get to write off any interest you pay on home mortgages up to 1 million dollars. This is a big break especially in the early years of the loan. The longer you have the home loan the less beneficial this tax break is but it’s still worth it.
Next,Â a new tax break just recently offered by the government gives first time home buyers a $7,500 credit on their taxes. You do have to pay it back slowly over a 15 year period, but it’s basically an interest free loan for 15 years.Â $7,500 is a great down payment on a new home.
Another break is that you can sell your home and keep any of the profit tax free every two years. As long as you have owned and lived in your home 2 of the last five years it’s tax free income on the profit. Best part is you can do this every 2 years. It’s a great way to buy a fixer upper, do a little work and sell it for a profit.
The finalÂ break is property taxes. Yes, you have to pay them but they are tax deductible.
Depending on the deal and interest rate you get you may be able to purchase a home cheaper than rent. Combine these savings with all the tax breaks and you are looking at a big savings. With tax time fast approaching don’t forget to keep an eye out for many more tax breaks!