Tax Advantages Of Buying A Home

          Mortgage interest and real estate taxes are tax deductible and anyone who has a mortgage can benefit from this tax benefit.

          There is no doubt that taxes are complicated and you are recommended to learn about the benefits, downside and how to file taxes properly. In order to enjoy the tax benefits, you have the alternative to wait for a big payout after you file your income tax return or you can adjust what is withheld each month from your pay check.

          In the initial years of your mortgage repayment, most of the monthly repayments that you make go towards the interest of the mortgage while just a small percent goes towards the principal amount. This means that the tax benefits you get from paying the interest on the mortgage is very beneficial.

          As you continue paying for the mortgage, over time more and more of the monthly payment goes towards the paying off the principal and less towards the interest. This means that over a period of time, you will lose some of the interest write off as the equity in your property increases.

          All tax payers are entitled to standard deduction and it is important that you take the mortgage interest tax deductions to itemized deductions if you change from standard to itemized deduction. However, if your itemized deductions which include your mortgage interest and property taxes, are not more than the standard deduction amount, it would be better for you to opt for standard deduction.

The following things from your home mortgage are entitled to tax deductions:

• Interest on the home mortgage
• Property taxes
• Loan points for a purchase mortgage is completely deductible in the year they are paid

However, it worth noting that in case of refinancing, the loan points are written off in increments over the term of the home mortgage.

There are certain items in your mortgage that are not entitled for tax deduction. They are as follows:

• Insurance
• Money used for home improvement
• Home inspection and loan application fees
• Commission paid to real estate or mortgage brokers
• Home owner and co-op dues>

You can enjoy several tax benefits if you take a mortgage and end up owning a home, especially if you are first time home buyer.

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