5 Great Tax Benefits of Homeownership

Five tax benefits that you can take advantage of if you buy a home.

Many would-be buyers ask me about the financial benefits of owning a home. Let’s take a look today and break down all the advantages of owning a home. It’s a tough market, but there are still plenty of good reasons to buy. Of course, buyers can take advantage of historically-low interest rates and build equity, but there are also a few tax advantages that buyers should be aware of:

1. Mortgage interest. After five years of owning your home, you can deduct interest up to $1 million from your taxes. Before that, you can deduct interest of up to $750,000. However, it’s unlikely that you’ll hit that cap if you’re a first-time buyer. This tax benefit is one of the reasons why it’s cheaper to own than rent.

2. Property tax. If you’re married, you can deduct up to $10,000 in property taxes, no matter how much you actually owe. Just make sure that the benefit from this is better than the standard deduction.

"If you’re married, you can deduct up to $10,000 in property taxes."

3. Private mortgage insurance. Deducting PMI can help reduce your taxable income. The Mortgage Insurance Deduction Act of 2021 extended deductions and credits that were set to expire.

4. Energy tax credit. There are many energy-efficient upgrades that you can make to your house that may give you a tax deduction, depending on your jurisdiction. That may include solar panels, water heater upgrades, insulation updates, and more. Check with your local municipality to see which projects you could do.

5. Home office deduction. More and more people are working from home, and more houses have offices as a result. If you’re self-employed and work from home, you can deduct $5 for every square foot of your office up to 300 square feet. The bad news is that W-2 employees can’t take advantage of this credit.

If you have any questions about these benefits or real estate in general, call or email my team or me. We would love to help you with all your real estate needs.