Does the idea of buying and owning a home excite you? If you planning to buy a home, you should also look at ways you can save money so that you are able to pay off the debt without falling short. The United States government encourages people to buy their own house and also provides some amazing tax benefits to the homeowners.
Here are the 5 tax benefits for buying and owning a home.
1. Mortgage interest write-off
Buying and owning a house has some massive benefits when it comes to a tax write-off. To take advantage of this, you need to lease or rent your property. Once you do this, you will get a tax write-off when you decide to buy another property. If you come in the 25 percent tax bracket, you will save 1 to 2 percent in taxes. Which is actually a huge amount when you calculate it annually.
2. Home offices
There are a lot more benefits to working from home than you think. Working from can also help you save money on taxes. You can get some tax deduction if you are planning to get a telephone line or make a renovation to your home. Any expense linked your home office is tax deductible.
So, now you don’t have to worry about getting taxed every time you spend some money in bettering your home. The amount you spend will be subtracted from your gross income at the end of the financial year and you will only be taxed for the remaining amount.
3. You get a write off on your property taxes
The rental income that you receive after leasing or renting the house you own has far more important that you think. You can leverage that income against the property taxes on your secondary real estate investment. This way you can buy more than two houses and avoid paying property tax by making an excellent decision to rent out your primary and secondary real estate investment.
4. 1031 exchange
1031 exchange is another tax benefit for buying and owning a home. Doing a 1031 exchange means to defer your current taxes by selling the property in exchange for another similar property. When you do this, your current taxes get deferred. Hence, you are not obligated to pay the tax at that moment. Some people continually defer taxes and let it accumulate until they are financially sound enough to pay them off.
5. Your interest amount is tax deductible
If you are planning to be the primary occupant of your home, you can save a lot of money by not paying taxes on the interest amount. When you buy a home on a loan, your lender sends a 1098 form at the end of each year notifying you of your yearly interest and the repayment amount. You can deduct the total interest amount from your gross income and pay taxes only on the remaining amount. This is one of the biggest benefits of buying and owning a home.
Just by buying and owning a home, you can get a mortgage interest write off, deduction in property taxes, defer your property tax and much more. Finally, it all boils down to whether you have the desire to own a home or not. If the answer is yes, there is nothing stopping from doing so.