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Tax Advantages & Deductions Of Owning Your Own House

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Tax Advantages For Home Owners
©iStockphoto.com – YinYang

We all know that there are benefits associated with home ownership that include increasing equity, privacy and several others. Do you know what the income tax benefits associated with home ownership are? Some of these benefits apply to those who have rental income from property owned while others are pertinent for those who own single family homes. As you are saving up your home loan down payment and getting ready to own your own house, you'll want to factor in these tax deductions into your overall plan. The amount of money you save on income taxes is really exciting and will give you some well needed "extra room" to pay your monthly mortgage payments (which are typically more expensive than renting).

Tax Deductions & Savings

There are many deductions that you are entitled to as a homeowner with the main one being the deduction of interest payments.

  • Interest Deductions - Being able to deduct interest payments on your mortgage can help reduce a significant part of your tax obligation on an annual basis. In the early years of your mortgage (assuming a traditional 30 year fixed rate mortgage) very little money is actually placed towards the equity of your home, since the bulk of your payment is considered to be interest. Work closely with your tax preparer and make sure you take full advantage of interest deductions. The beauty of the interest deductions is they help offset the difference in cost between buying a home and renting one.
  • Energy Efficient Deductions - Do you know that you can deduct certain home repairs that are made to make your home more energy efficient? Be sure to talk to your tax preparer and find out if any repairs you have made can help reduce your tax obligation! Depending on your individual state you may have options to deduct for things such as insulation, window coverings in winter time, upgrading of your heating system or your hot water heater. Upgrading your home by spending a few extra dollars today could result in excellent long term energy savings and tax deductions. Moreover, you're doing something great for the environment.
  • Real Estate Taxes - You might be surprised to learn that your real estate taxes can be deducted on your income tax returns. Many new home owners are not aware that this is an option that they can exercise to reduce their taxable income. Deducting your real estate tax payments on your income tax will allow you to have a lower tax burden based on your ability to earn higher amounts of money. Using all of the possible real estate tax deductions on your income tax means that you will be able to save even more money.

More Information As Your Save Up Your Down Payment

As you save up your down payment, it's the perfect time to understand the mechanics of buying a house, including the tax advantages and pros and cons of different types of home loans. The purpose of this article is to get your feet wet with an introduction to the tax advantages of owning your own home, but you will also want to consult your tax advisor. As additional resources, you may wish to check out our home loan tips for first time home buyers and also our guide to finding a great real estate agent.

This article is written by guest author Doreen Martel exclusively for Save For House.

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