Searching for a new home in Kyle is a wonderful adventure. That ideal home and all its possibilities await you out there somewhere. Buying a new home, no doubt, is one of the most memorable times in a person’s life. And it will increase your net worth for all its worth and other advantages.
Here are the top tax benefits of owning a home.
- Deduct Interest on Your Mortgage
Homeowners will be able to deduct the interest they pay on their mortgage. Be aware that this applies to home financing that’s under $750k. if you’re shopping for a home in Kyle, Texas, you’re most likely to gain the full benefit of this. One of the reasons people love living in Kyle is for its affordability.
Any interest you pay as part of the closing costs associated with the purchase will be deductible. You can usually find this information on the settlement sheet. Prior to tax time, your lender will send IRS Form 1098 to you. This shows all the money you’ve paid in interest on your loan for the past year.
- Deduct Private Mortgage Insurance (PMI)
Private mortgage insurance is often required for buyers who put down less than 20 percent of the value of their home. Its purpose is to protect the mortgage lender in the event the buyer quits making payments toward the loan.
Just like the ability to deduct interest that you pay on a mortgage, you can also deduct the amount you pay for private mortgage insurance. It can slightly reduce the financial burden for those who can’t put down 20 percent.
- Deduct Property Taxes
Homeowners can deduct up to $10k per year on property taxes. You may pay property taxes either through your lender or municipality. In both cases, it’s critical to keep financial records of the amounts you paid for the year. You can save thousands of dollars when deducting property taxes.
- Deduct Home Office Space
With many people getting to switch to remote working thanks to the pandemic, this will be a new benefit. People who work from home can deduct the square footage of the space used as an office. You can also deduct resources you use to conduct business such as computers, printer toner, and webcams.
To prevent the abuse of this deduction, the IRS caps this to 300 sq. ft. This is one where a tax professional is your best bet to ensure you optimize this deduction while following the rules.
- Deductions for First-Time Buyers
Homebuyers sometimes take out money from their IRA to put toward their down payment. However, the IRS often imposes a 10 percent penalty for withdrawing from an IRA before 59-and-a-half years old. The good news is that anyone who has never owned a principal residence in the past year may be able to withdraw up to $10k without penalty, or $20k for married couples.
You can use this method when buying a home for a family member. Be aware that any funds you withdraw from your IRA need to be used within four months of the withdrawal.
Don’t let the homebuying process daunt you. There are people who can help you. Ask them about these tax benefits. Good luck with your home search.
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