Unbelievable Tax Benefits of Owning A Home.
Did you recently buy a house or are you considering on buying a house and wondering what the tax savings are or the tax benefits are of buying a house? If so, then this video is for you. Let’s get started.
There are several deductions available, there are several benefits and savings.So I’m going to give you some of these.The first one is that when you buy a house, you get tax deductions on the interest rate that you pay, especially the first year. Almost 80% of your payment on your first year payments is interest payments, which is a lot. So there are limitations on how much interest you can deduct per year.
Depending on where you are and what your situation is and your loan amounts and your points, please consult with any of these items that Italk about with your attorney or your tax advisor or a CPA before you make this decision. So as you know, a big chunk of your payments for the first 5-7 years is interest. So that is all deductible every year. And as far as how much is deductible, as I Mentioned earlier, check with your accountant, but they are deductible and gives you a great tax break and tax benefit.
1.) A lot of people buy homes, not only for residential homes, but especially income property, and rental property, and investment properties, are for such deductions.
2.) You get a tax break on your property taxes. In Orange County, California, where I’m at, our property tax rate is approximately 1.1%. So if I buy a million dollar house and pay 1.1% tax, I am paying $11,000 a year on property taxes starting the first year and they go up every year.
So if I can take that deduction, that’s a big savings for me and tax benefit. Of course, there are limitations depending on what state you are and what the federal laws are. There is limitations on your interest deductions per year as well as your property tax deductions. So again, check with your professional before you make a decision.
3.) You get tax deductions and tax savings on the closing cost that you pay. As you may know, especially in California, we have an escrow company, we have title fees. When you get a loan, the lenders charge you points. If you have a PMI, which is a private mortgage insurance, you have those additional costs. There are a lot of other expenses when you close an escrow or when you purchase a property, like your document preparation fees, your notary fees, your deed transfer title, all those little things add up to thousands of thousands of dollars.
A lot of these are deductible. So consult with your attorney or your accountant and see how much you can deduct, because everything that you can deduct is a tax savings for you. One of the ways to benefit by owning a house or a property is get as much tax write off, tax savings, tax benefits if you can. So it may be worth paying $300-$500 or more to an accountant so that you can save thousands and thousands of dollars. But closing costs are deductible. Not all of them are deductible, but alot of the closing costs are deductible.
4.) Home improvement deductions. Now, generally speaking, and I’m not an attorney or an accountant, but generally speaking, home improvements may or may not be deductible. But the one way around it is a lot of the homeowners and people that have sold home to take out what you call a HELOC loan, which is a home equity line of credit. So let’s say you’ve been in your house for three-five years and you want to do a major remodel, or you want to add a room,or do some additions and do some real property improvement.
What you could do is you could borrow from your HELOC, which is a home equity line of credit, and then those interest rates that you pay your HELOC loan are also deductible. Now compare that to, let’s say you need $20,000 and you charge everything on your credit card and paying 15% interest rate on your credit card. That may or may not be deductible, but any interest that you pay on your HELOC is deductible. So that’s an advantage if you are considering doing an upgrade in your home or remodeling and pulling out a HELOC loan.
5.) The next tax benefit of owning a home is when you improve or add energy efficient appliances. For example, in California, if you install a solar system, the state of California, like many other states, is giving rebates tax advantages for installing a solar system. Not only does the solar system save you electricity, help the environment and improve the value, or add some value to your home, because some of these cost anywhere from $10,000 depending on the square footage of solar panels that you get. So not only do you get the advantage of using and saving electricity on saving on electric bills, but you may get rebates and tax write offs. Each state has their own requirements and limitations, so check with your state or your county level and find out if they still have money for rebates and tax breaks, but definitely a great one to look into.
6.) Your primary residence is that if you are working from home, many, many people are now working from home, either the spouse or if you’re single, you’re working from home, then you can dedicate a room. Like, let’s say you have a bedroom downstairs. If you dedicate the room just for your office use, then you can deduct portions of that use of the space. So there are some limitations, there are some restrictions, but that’s a great benefit. To get real details about how you can deduct home office, please check with your accountant. But that’s definitely an advantage that a lot of the people I know are working, working from home and not claiming deductions on the home office use.