Posted on: November 17, 2022 Posted by: ashley.bryant@allentate.com Comments: 0

Last Updated on October 9, 2023

If homeownership is on your radar soon, you’ll be happy to know that in addition to building equity, owning a home comes with many tax benefits that help taxpayers reduce their taxable income.

 Here to walk you through some of the most common tax benefits of home ownership is Jef Stehman, VP of Production with Howard Hanna Mortgage.

Mortgage interest

“The largest tax break available to homeowners is directly tied to the monthly payment you’ve made each month, as for most homeowners, a significant portion of your total amount due goes towards interest,” says Stehman.

The good news here is that all of that interest is deductible. This includes what you have paid in interest each month on your mortgage and any interim interest you paid at closing. Stehman says you can find the interim interest figure on your Closing Disclosure.

 And if you happen to own a second home, the rule applies here, too. Your lender will send you a Form 1098 in January showing your total interest paid for the previous year.

Points

Don’t forget about points, says Stehman. “If you paid any points at closing to obtain a lower interest rate, these may also be claimed as a deduction in this first tax year after the purchase of your home.”

Private mortgage insurance

Many first-time homebuyers also have Private Mortgage Insurance (this is required when you have less than 20 percent down). Check with your accountant as  your Mortgage Insurance may also be deductible, depending on your income.

“Mortgage Insurance is typically included in your monthly mortgage payment, but it is possible that you elected to pay it as a lump sum at closing,” says Stehman. Check your Closing Disclosure for this information.

Moving expenses

Did you move for a new job, or transfer to a new location for your existing job? If so, there’s a good chance that you can deduct some eligible moving expenses. You’ll need to verify that you are eligible, but you may be entitled to claiming some deductions like mileage and hotel expenses.

Other deductions

There are other possible deductions that you may be eligible for, including credits for energy efficiency, deductions for home office, etc. Your accountant or tax professional can advise you on others that you may qualify for.

“While filing your taxes may be a bit more complicated, the benefits of homeownership more than outweigh a little more paperwork when it’s tax time,” says Stehman. Take a moment to celebrate the joy of owning your own home, and the tax advantages of homeownership.

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