Buying a home can help reduce your bill of tax. In fact, tax breaks for the property are a primary motivation for many people to buy their own home.
To ensure you get the maximum benefit from your purchase of a home, however, it is important to understand the potential tax benefits.
Keep these tax considerations in mind when buying a home.
you can deduct the tax portions interests and property of your mortgage payment
your house payment includes both the interest and principal.
You can pay insurance and property tax payments to your mortgage holder, which in turn pays at maturity. You can also pay other fees, especially mortgage insurance premiums if necessary.
You can usually take a deduction for the interest you pay at your bank or other lender. You can also deduct the property taxes pay your lender on your behalf.
private mortgage insurance premiums are not deductible
Do not count on the deduction of private mortgage insurance premiums.
If you buy a house now, you probably will not be able to deduct. Private mortgage insurance, or PMI, is the cover of your lender may require you to purchase if you have too little equity in your home to protect the lender against your fault.
The deduction for PMI origin in 07 but expired at the end of 2014 unless Congress renews the deduction, the 2014 taxation year is the last, it can be claimed.
you can not take a deduction if you itemize deductions
Before you count how much you'll save taxes by buying a home, consider how other itemized deductions you take, and if you itemize your deductions.
Even if you can itemize deductions after you buy a home, you can not save much on your tax bill than you think. In fact, your total itemized deductions only reduce your taxes to the extent that they exceed your standard deduction.
On the other hand, if you have detailed your deductions, or if you are close to being able to itemize your deductions already, you will receive the maximum benefit from your interest and property tax deductions.
common itemized deductions include charitable donations and tax state revenue.
you can deduct items such as medical expenses and loss of losses, but to the extent that they exceed quite high "floors" for these deductions
for 2014, standard deductions by filing status are :.
| State deposit | Standard Deduction |
|---|---|
| single or Married filing separately | $ 6,0 |
| householder | $ 9,100 |
| Married Filing jointly or Widow qualification (er) with dependent child | $ 12,400 |
in 2015, the standard deductions by filing status are:
| State deposit | standard deduction |
|---|---|
| single or married filing separately | $ 6,300 |
| householder | $ 9,250 |
| Married filing jointly or Widow qualification (er) with a dependent child | $ 12,0 |
Your standard deduction is higher if you are 65 or older or if you are blind.
more taxes you pay more tax breaks for owner likely you [help
It is difficult to save a lot on your tax bill if you have little or nothing to uncle Sam first.
This is one reason young people should not rush into buying a home - they can not save on taxes they do not owe. Tweet this
If you pay taxes on federal income, say you're in the tax bracket of 15%, each $ 100 of your mortgage or deduction of property taxes reduces your taxable income will save you $ 15.
This is nice, but it is hardly sufficient motivation in itself for you to run out and buy a house.
If you're in the tax bracket of 25%, however, the benefits become more convincing.
When you add the benefits of saving $ 25 tax for every $ 100 you pay in mortgage interest and taxes other benefits of the property, you may want to start shop for homes.
do not forget to account for income taxes of the state, too.
and remember that buying a home does not only affect your taxes for this year and next. You'll probably still be there as your income level and increasing your tax bracket over the years.
Do overbuy a home for the tax benefits
The more you pay for a home, the more your deductions for mortgage interest expense and property taxes. This does not justify going out and buying too much house, however.
As we have seen in recent years, a house is a lousy investment if you can not hang on it.
Make sure you buy a house you can afford, without undue stress, even when things do not always go as planned.
Consider all the reasons you want to buy a house
buying a home can be a great way to build equity, and finally have it free and clear if you wish.
it protects you for an owner to increase your rent or sell your home as you. It may feel more at home in a place where you are just renting, and you will not have to ask permission to paint the kitchen any color you want.
The tax advantages of buying a house definitely help tip the balance towards the property, if that's what you want. Tweet this
There is no good answer to whether you should buy a house or keep renting, however.
consider all economic reasons, as well as economic you thinking about buying a house before, which could be one of the most important purchases of your life
photo credit :. Universal Pops (David) via photopin cc
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