Tax Benefits of Home Ownership*
Tax Deductions for Homeowners
- Real estate taxes
- Interest paid on home mortgage and/or home-equity loan
- Qualifying expenses if income-generating business is based out of the home
- Qualifying expenses if renting out residence and meeting other tax law requirements
- Unfortunate losses occurring as a result of fires, storms, floods, earthquakes, etc., to the extent the loss exceeds a dollar and adjusted gross income threshold (after reduction for insurance reimbursement)
Tax Tips for Homeowners
- Points paid on home mortgages may be deducted in the tax year they are paid.
- Points paid on a refinanced mortgage do not qualify for current deductions: owners deduct them pro rata over the life of the loan.
- If owners refinance more than once and in doing so pay off a prior refinanced loan, the balance of points not yet deducted becomes deductible in the year of the new refinancing.
- A home equity loan may enable a homeowner to finance large purchases and maintain deductible interest. However, interest accruing on consumer loans such as credit cards is not deductible.
Closing Costs Paid by Seller
Our real estate agents are highly trained to negotiate on behalf of the buyers we help. Getting closing costs paid by the seller is always a top priority. Recent data shows closing costs are on the rise but they normally run anywhere from 3 to 6 percent of a home's purchase price. If homebuyers are buying a home that is $250,000,then closing costs could be as low as $7,500 and go up to $15,000. Thankfully, buyers can rest easy knowing their agent is working diligently to reduce or eliminate these costs altogether.
The Veterans Administration allows up to 4 percent of seller concessions in addition to closing costs paid by the seller. Buyers can use these funds for home repairs or installing the latest upgrades. Homebuyers may also elect to reduce their debts with this chunk of change, which can help pave the way towards achieving financial freedom.
The FHA once allowed up to 6 percent in seller concessions but in 2010, a rule was proposed that would slash this amount in half to only 3 percent. Homebuyers interested in pursuing FHA loans should act fast before the rule goes into effect.
*This information is deemed reliable of a general nature and should not be acted upon without further guidance or assistance from a tax professional. Please consult your tax professional before taking any action.
Additionally, not all loan products are the same. Please call us to learn more about what may be available based on your unique situation.