Tax Breaks for Homeownership | Trusted American Mortgage
From renovations to repairs, there can be times when it feels like owning a home is nothing but a way to spend money, but there are regular reminders of the benefits. Making your payments on time can help you build your credit and you can borrow against the equity, to name just a couple.
Then there are the annual benefits that come at tax time, with several deductions available for those who own their homes. From when you buy the property through the term of your loan and even for as long as you own the residence, you may be able to get reductions in your overall tax burden. Here are a few of the ways you can do that.
First, the Details
The standard deduction, the minimum amount every taxpayer gets, is $12,400 for single filers, $18,650 for heads of households, and $24,800 for those married and filing jointly for 2020. Increases in the standard deduction mean that about 70% of tax filers take it, with their itemized deductions adding up to less than the applicable standard deduction.
We point that out first to give context to the fact that everything we’re going to cover here is a deduction, which means you get them when you itemize. If your deductions don’t add up to more than the standard one, you likely won’t get the benefits listed here. Now, the good stuff.
Deductions for Homeowners
The actual process of purchasing a home doesn’t open the possibility for much tax benefit, but there is a common deduction available to those who open a mortgage. Those who get a home loan with points, which may also be called loan original fees or be considered an upfront on mortgage insurance, can deduct that expense. There are some requirements borrowers must meet, including that the loan must cover their primary residences and the points were normal for the area.
The real tax benefits of homeownership show up for most people as they pay off their loans. For instance, there is a deduction for private mortgage insurance that can help those who have that extra cost added to their monthly premiums. While the PMI deduction briefly disappeared after 2017, it’s back now and can even be retroactive, so make sure you look into this possibility.
While not everyone who has a home loan pays PMI, everyone with a mortgage pays interest, so it’s a good thing the mortgage interest deduction is available. It allows filers to deduct all their mortgage interest payments on debt below certain thresholds. For most people, this is the most significant tax benefit of owning a home.
If you’re ready to get all the benefits of owning a home, Trusted American Mortgage can help you secure the perfect loan for your situation. Call our experts today and let us get you started on the road to homeownership!