Owning a home can provide you with significant tax benefits. It’s important to learn how home ownership can impact your taxes so you know which home-related expenses to claim on your returns for maximizing your savings potential.
First, with the exception of very large loans, you can generally deduct the cost of the fees you paid when securing your mortgage. Second, if you are an active-duty member of the armed services, you may be able to deduct your moving expenses from your taxable income if you need to move because of a permanent change of station due to a military order.
There are multiple ongoing tax benefits to owning a home:
- Mortgage interest deduction. Most homeowners can deduct the interest paid on their mortgage from their taxable income.
- Real estate taxes. The money you pay in property taxes may be deductible from your taxable income.
- Private mortgage insurance (PMI). If you took out a loan that was equal to less than 20% of the home’s value, you may be able to deduct your PMI payments from your taxable income.
- Home equity debt. If you’ve taken out a home equity loan or line of credit against your home, the interest payments on these loans may be able to be deducted from your taxable income, as long as the loan is used to expand or improve your home.
- Home office expenses. If you use a part of your home exclusively for work purposes, you may be able to deduct related expenses.
Home ownership comes with many advantages, some of which include tax benefits. Keep that in mind as you explore your options, and as with all tax advice, please remember to consult a tax professional for the most current and accurate laws.
