Are you thinking of buying a home this year? If so, there are some significant income tax benefits that you should be aware of.
Depending on your income, mortgage size and filing status, these benefits can reduce your federal income taxes by thousands of dollars each year.
Mortgage Interest Deduction. Homeowners can deduct their mortgage interest payments, which can reduce the amount owed in income taxes. While there are limits to the amount of mortgage interest you can deduct, most homeowners qualify for this deduction.
Property Tax Deduction. Most people are aware of the mortgage interest deduction, but did you know that you can also deduct the amount paid toward property taxes? This benefit can further reduce the amount you pay in income taxes.
Click here to view the IRS regulations on mortgage interest and property tax deductions.
Mortgage Credit Certificates. Qualifying first time home buyers are also eligible for a special tax credit known as a Mortgage Credit Certificate (otherwise known as an MCC). With an MCC, a homeowner can take a portion (up to $2,000) of the annual interest paid on their mortgage loan as a tax credit every year. Note: You MUST apply for an MCC when purchasing your home in order to receive the tax credit. Click here to learn more about MCCs and find out if you qualify for TSAHC’s MCC Program.
Some homeowners may also qualify for additional tax deductions, listed below:
- Private mortgage insurance premiums for policies issued after 2006. Note: 2014 is the last year this benefit can be claimed unless it is renewed by Congress. This benefit also has income requirements.
- Interest on up to $100,000 borrowed as a home equity loan or line of credit
- Home improvements required for medical reasons
- Mortgage “points” paid up front to reduce a homeowner’s interest rate
For more information, check out Turbo Tax’s tax guide for homeowners.
Did you buy a home last year? Make sure to let your accountant know so they can help you maximize your tax benefits. And remember to file your taxes by April 15th!
On the House blog posts are meant to provide general information on various housing-related issues, research and programs. We are not liable for any errors or inaccuracies in the information provided by blog sources. Furthermore, this blog is not legal advice and should not be used as a substitute for legal advice from a licensed professional attorney.