Tax benefits of home ownership can be very attractive this time of year. These benefits are often the reason some make the investment into buying a house — as homeowners can realize these benefits year after year on their taxes.
Some tax benefits can help offset the expenses of buying a home. If you bought your home this year, the points you paid at closing may be deductible in this year. In addition to that, some states offer eligible first-time home buyers, with certain income requirements, a federal tax credit with the Mortgage Credit Certificate (MCC) program. These credits reduce your federal income taxes.
When you’re itemizing your taxes as a homeowner, you may be able to deduct your property tax bill (up to a combined total of $10,000 for state and local taxes) every year. And, mortgage interest payments are deductible every year as well. Selling your primary residence? You can exclude a large portion of your profit for selling your home from capital gains tax, if you lived in the home for a specified period of time.
Have a home office and are self-employed? If you use a portion of your home exclusively for business, you may be able to deduct expenses related to that space.
Take these perks into consideration if you are thinking about buying a home. Keep in mind that some of these tax benefits require you to itemize your deductions instead of taking the standard deduction.