What sounds better than hearing about tips on tax breaks? Those who plan on purchasing a house can actually be up for something better! Buying residential property can help you save on tax dollars.
If you are a new homeowner, congratulations! Not only do you have a new home, you also have new tax considerations. Knowing more about the potential tax benefits from homebuying will work more to your advantage.
Your Interest and Property Taxes
You can actually have a tax deduction when you pay for the loan interest and the property taxes. When you buy a home, you will make a number of payments to the lender including property tax. This property tax will then be paid by the lender when it becomes due.
Itemizing Your Deductions VS. the Standard Deduction
Standard Deductions are your fixed tax reductions based on your filing status.
Adjustments are done to the Standard Deduction amounts because of the inflation. For 2017:
$6,350 – Single or married couples filing separately
$12,700 – for married couples filing jointly
$9,350 – for Heads of Household
It should be noted though that you can only make use of the standard deduction or the itemized deductions, not both.
Now, if you choose to make use of the actual itemized deductions, you benefit from it more if the total amount exceeds that of your standard deduction amount.
Your total itemized deductions may include some home expenses that are allowed by law, state income taxes, charitable contributions, some select sales and use taxes, allowed medical expenses, and other miscellaneous expenses.
If the total amount exceeds the standard deduction amount of your filing status, then itemizing your deductions would benefit you more.
Form 1040 will be used for your actual itemized deductions.
While tax breaks motivate others to become buyers because of the huge savings, remember that these are just added benefits. Always consider all aspects when buying property.
Never overbuy because you just want to save more. Remember the financial obligations that come with home buying. Look for a house that you can afford to pay off even when the rainy days come.