There are several places to look for tax savings for people who are buying or who own a house. In fact, the purchase of a main residence for a person has a lot of different financial advantages. Tax savings will accrue each year, especially if the homeowner has a mortgage on the home, tax savings are a major reason for a person to buy and improve a home.
Each year, the different tax advantages may change, so it is important to speak with your CPA or tax professional to figure out these tax savings year by year.
A homeowner can take many home related deductions on their federal income tax form each year. They can deduct the mortgage interest each year, within very generous limits. This mortgage deduction is a real significant bonus for the homeowner (the interest portion of your house payment is significant; it may be as high as 90 – 95% of your entire mortgage payment… deductible).
Most homeowners could not afford to pay cash for their homes, and so a mortgage is necessary, they can deduct most if not all of the interest paid on this mortgage on their federal taxes. This is a primary tax savings advantage for homeowners.
Some home improvements can be tax savings for the homeowner also. For example, some energy improvements can result in tax savings on both federal and state taxes.
Homeowners can also deduct the various property taxes paid on the home. These are deductable because that tax has already been paid to the municipality. The municipality will often fund schools, roads, and police with this tax. This property tax savings is an additional benefit to homeowners, and it is also deducted on the federal income tax and for several states as well. The result of the property tax of course will provide a wonderful neighborhood, city and services equaling peace of mind for the homeowner. When a person is considering the purchase of a home, neighborhood conditions, the various tax savings, and improvements are crucial considerations.
Finally, in addition to these excellent tax savings, the buildup of equity for a home will help the homeowner against the ravages of inflation. Historically, the homeowner will have more and more equity, or value in the home, each year. The mortgage will be paid off a little each year, increasing your equity, and potentially lowering your taxes as you enter your golden years.
Author Jeff Hammerberg is the Founding CEO of www.GayRealEstate.com ~ Free Instant Access to the Nation’s Top Gay, Lesbian and Gay Friendly Realtors Coast to Coast.