There are a ton of tax code benefits for those who own their homes. To be upfront, the greatest benefit is that the owners do not pay taxes on what is called “imputed rental income” from their
THE BIGGEST TAXWRITE OFFS WHEN OWNING A HOME
There are a ton of tax code benefits for those who own their homes. To be upfront, the greatest benefit is that the owners do not pay taxes on what is called “imputed rental income” from their own homes. This simply means that they do not have to count the rental value of their homes as taxable income, although the value is just as much a return on investment as interest from a savings account would be. Plainly put, it’s a form of income that is NOT taxed.
As a home owner, you may deduct both mortgage interest and property tax payments along with other certain expenses from their federal income tax. However, our current system does not tax the imputed rental income that homeowners receive, so the justification for giving a deduction for the costs of earning that income has yet to be clear.
Mortgage Interest Dedections
In order for a homeowner to maximize their efforts, the would want to itemize deductions so that they may reduce their taxable income deducting any interest paid on the home. Although the deduction has a limit to interest paid on up to $1 million of debt incurred to purchase or rehab a home. Another advantage would be for the homeowner to have the ability of deducting interest paid on up to $100,000 of home equity debt, regardless of how they choose to distribute the borrowed funds.
Property Tax Deductions
This deduction is effectively a shift of federal funds to jurisdictions that force a property tax, allowing them the advantage of raising property tax revenue at a lower cost to their constituents. In the end, you want to seek the advice of a tax professional or CPA, but if you do not have one we could definitely help refer you to one.
Hopefully, this helps with understanding some of the many advantages to being a homeowner when it comes to tax deductions. Thank you for reading our blog and make sure to subscribe if you would like future information like this.
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