Tax Incentives of Home Ownership

One of the major advantages of home ownership is all of the tax implications involved. There are numerous deductions that someone can claim when they own a home and it is important you keep these in mind when it comes time to file.

Mortgage Interest

Your largest deduction may likely be your mortgage interest. This one can really be significant during those first few years of your mortgage when the majority of your payments is going toward interest.

Private Mortgage Insurance (PMI)

If you financed more than 80% of your purchase price of your home, your lender will require you to pay mortgage insurance. The purpose of this insurance is for the lender to protect the lender if the buyer defaults on their loan. You will pay this insurance until you pay off at least 20% of their principal.

Property Taxes

Another significant tax deduction is the property taxes that one pays on their home. The amount you pay in property taxes is going to depend on the state, county, city, and district that you live in. For instance, in Arizona, your property taxes will be levied based on the assessed value which for residential properties is 10%. If the property tax in your area is, let's say, 12%, it would be 12% of that assessed value. So if you own a home worth $200,000, the assessed value would be $20,000 and your property tax would be 12% of that or $2,400.

Home Equity Loans

If you are lucky enough to have equity against your home, you may decide to take out a second loan or a home equity loan. Under certain conditions, you may be able to deduct the interest on that loan as well.

These are the main deductions that you will be able to make as a homeowner. There may be additional deductions that you may be able to take, based on your specific situation. Always check with your accountant about your specific tax situation. You will also want to be sure to keep good records that will back up all of those tax deductions that you claim.

There are many advantages to home ownership. If you live in Arizona and you are interested in looking for a home, start looking at listings today on my website at www.robbohr.com.