What owning a home can mean for your taxes.
Taxes. It’s usually a dreaded word that fills everyone with trepidation around April 15. But did you know home ownership is actually one thing you can do to lighten this burden? Tax benefits of home ownership are almost too good to be true. The Internal Revenue Service will look down on you favorably! REALTOR.com shares the best tax benefits.
Your tax breaks come full circle in the lifecycle of home ownership, and it all begins at the purchase.
The IRS says you can deduct interest in the year that it is paid, and that is usually part of each monthly loan payment. In addition, if the day you purchase is on any day other than the first of the month, you will likely pay a charge for “daily interest” between the day of closing and the end of the month. Look on line 901 of your HUD settlement statement.
The IRS also says that, in most cases, loan discount points and origination fees are tax deductible to the buyer, regardless of who pays them. Look at lines 801 and 802 of your settlement statement and see if you hit the jackpot. This is a particularly unusual deduction because you get the benefit even if the seller paid your closing costs. And because origination fees of 1 percent and more are common, this can amount to a lot of cash.