Uncle Sam wants you...to be a HOMEOWNER!

Wouldn’t it be great if the government kicked in some money to help make home ownership more affordable? Because of deductions on mortgage interest, property taxes and now the $7500 tax credit for first time home buyers, the practical effect is that the government is subsidizing your home purchase. In fact, home ownership provides three of the best ways to reduce your tax bill.

 

1)  Mortage Interest you pay can be deducted from you gross income to reduce your taxable income. For example, say you take out a $300,000 mortgage loan at 6% interest. You pay $18,000 a year in interest on that loan. That means your taxable income for the year is reduced by $18,000. If you’re in the 25 percent tax bracket that means a one-year tax savings of $4,500 (25 percent of $18,000)

 

2) Property taxes may also be deducted from your gross income, lowering your overall annual tax obligation. Property taxes are levied on homeowners in the US to pay for a variety of public services. You may see local tax rates between 1 and 2 percent of the property’s current assessed value, depending on where you live. Property taxes are fully deductible on your primary home, second home or vacant land.

 

3) New $7500 Tax Credit for First-Time Home Buyers. This credit may be going up to as much as $15,000 in the new stimulus package.

 

Several of our clients have called us this year to THANK US for their larger than normal tax refund. They had no idea how advantageous owning a home could be from a tax perspective, in addition to the many other benefits of home ownership.