Tax Breaks That May Lower Your Homeownership Costs
If you have a home, it’s important to keep homeowner tax benefits in mind before you file taxes. And if you are just thinking about buying a home, make sure you consider these tax benefits for homeowners when calculating the overall cost of homeownership. Here are just a few examples of the tax benefits of homeownership:
- The mortgage interest deduction allows you to deduct the interest you have paid on your mortgage. Keep in mind that this homeowner deduction even applies to mobile homes, houseboats and more.
- Property tax deductions allow you to deduct up to $10,000 of qualifying state and local property (AKA real estate) taxes you have paid in your filing year.
- The private mortgage insurance (PMI) tax deduction allows you to deduct the amount of money you have paid for private mortgage insurance. Typically, you have to pay PMI if your down payment was less than 20%.
There are also tax benefits and tax deductions for homeowners who have made modifications to their homes:
- You can deduct interest paid on home equity debt if you have used the loan to purchase, build or make substantial improvements to your home.
- You can get a homeowner tax credit to cover the cost of purchase and installation for renewable energy modifications (solar, wind or fuel cells).
- You can get a homeowner deduction if you have made medically necessary home improvements for you, your spouse or a dependent.