If you're a devoted renter or are on the fence about buying a home, have you considered the numerous tax breaks you could take advantage of if you were a homeowner? Renters have virtually no tax benefits, other than deducting home office space or property tax payments that are bundled into their lease agreement.
On the other hand, Uncle Sam provides a financial incentive for people to own a home by providing the following tax breaks.
Homeowner Tax Breaks
Mortgage Interest Deduction — The interest you pay on your mortgage is tax deductible for any home loan up to $750,000, if you itemize deductions. As a new homeowner, this tax perk can be a big help, since interest makes up most of your mortgage payments early on.
Mortgage Interest Credit — In addition to deducting your mortgage interest payments, you may also be able to get a credit of up to $2,000 for the interest you pay, as long as you meet certain eligibility requirements and obtain a Mortgage Credit Certificate (MCC) prior to buying your home.
Mortgage Discount Points — Mortgage Discount Points are something you can purchase to lower your interest rate when you first buy your home, and they’re completely tax deductible if you choose to itemize.
Sales and Property Taxes — State and local real estate taxes are also tax deductible, up to $10,000.
Should You Buy or Should You Rent?
The above tax benefits provide a substantial incentive to buy a home instead of rent, but your final decision should be based on what's right for you financially. Factors that play into this include the cost of your rent versus the cost of your potential home, how long you plan to live there, and how high or low mortgage rates are when you buy
If you need help weighing out these variables, use this buy vs. rent calculator. Just plug in your own numbers to find out whether buying or renting is more affordable for you.
This company and its loan officers are not tax experts or financial advisors. You should consult a tax professional and/or a financial advisor regarding the deductibility of interest and charges and to devise a strategy that works best for your situation.