Thursday, March 5, 2020 / by Marketing Dude
Buying a house is super exciting, but you should want more than just a cool place to live. Your home is an investment, and there are huge financial benefits you’ll receive when you purchase a property. To make sure you’re making the most out of your homebuying journey, I’m going to show you some major tax advantages of owning a house. Since you’re investing so much money into owning real estate, you need to be aware of all the privileges ad write-offs that will come your way.
If you’ve ever had your parents, grandparents, or friends pressure you to buy a house, don’t be too quick to dismiss their recommendation. Their insistence is not just about coaxing you into homeownership; they want you to benefit from the tax advantages. These perks make purchasing your very own property even sweeter, so read on to see what advantages you’ll get.
Tax Advantage #1: 100% of your loan interest is tax-deductible.
As long as your home is your primary residence, you’ll be able to write off all of the interest paid on your loan. This means you could be saving thousands of dollars each year by simply owning your own home.
To illustrate how this works, let’s use a homeowner named Olivia as an example. She just purchased her first home and makes $50,000 a year. At the end of the year, Olivia calculated that she paid $8,000 in interest on her loan. That means she’ll only be taxed on an income of $42,000 since the interest is deductible.
Tax Advantage #2: Your property taxes are tax-deductible.
Many people set money aside each month for property taxes along with their mortgage payment. When you pay those property taxes, you’ll be able to write them off at the end of the year.
Let’s go back to Olivia. She paid $3,000 in property taxes, so she’ll be able to deduct that amount in addition to her mortgage interest. This means she will only be taxed on $39,000 worth of her income, instead of the full $50,000.
Tax Advantage #3: Buying saves you more money than renting.
You may have seen articles online that tell you it’s cheaper to own vs rent. Buying saves you money because of the tax advantages that renting doesn’t provide, even when the monthly housing payment is similar. You could pay a mortgage payment of $1,500, for example, and get great deductions on your taxes as well as the freedom of owning. Or, you could rent for $1,500 and never actually own the space you’re in. It’s a bit of a no-brainer when it comes to which is the best investment.
Tax Advantage #4: Additional benefits for the first year of your purchase.
The year that you buy your home will see some additional tax breaks you may be able to take advantage of. These depend on a variety of factors, so communicate with your accountant to make sure you’re taking advantage of everything you qualify for.
Buying a home is about finding a place to settle down, but it’s also primarily an investment. Knowing what benefits and tax advantages you’ll be in line to receive can make the decision to purchase real estate much easier to make. If you have any more questions, please feel free to reach out to me and I’d be happy to help!