Tax Benefits of Homeownership – Are They Enough Of An Incentive To Buy A Home?

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LoanLove.com takes a look at the mortgage interest tax deduction that homeowners can partake of and explains more about the tax benefits that are available to those who own their own homes.

LoanLove.com is a borrower advice website that offers in-depth information on home loans that experienced home buyers can benefit from in an easy-to-understand and entertaining way that even first-time borrowers will be able to grasp. The team at LoanLove.com is devoted to help empower both first time and experienced homeowners with valuable resources, first-class knowledge and connections to top-rated industry professionals and has the mission of helping consumers and borrowers to obtain the latest information on mortgage lending news, the real estate market and the U.S. financial landscape in order to help them obtain a home loan that they will love. Loan Love continues to offer readers first-rate advice when it comes to managing loans and homeownership with their many resourceful articles and how-to videos. Their newest article explains to readers the tax benefits of home ownership and why owning a home over renting one may be worth it in the long run.

The latest article from Loan Love titled “Mortgage Interest Tax Shield (Maximize Your Savings)” begins by explaining to loan borrowers the chief reason why home ownership is so favorable – mortgage interest payments are considered tax deductible when owning a home. As the article states: “If you are like most homeowners, nearly all of your mortgage payment every month is going toward interest and not your loan’s principle. The good news for taxpayers is that all that interest is deductible, as long as you itemize and don’t just take the standard deduction. Unless, of course, you had to take out a home mortgage of over $1 million. In that case, you can expect the Internal Revenue Service (IRS) to limit your mortgage interest deduction.”

The beauty in all this is that interest rate tax deductions are not limited to a home owner’s first house. In many cases, full deductions on mortgage interest can apply throughout all the properties of a homeowner; not just the homeowner’s many property. There can be limitations however, so consulting a tax advisor or accountant is well advised. Mortgage loan borrowers who pay points on a mortgage loan can also claim deductions on their taxes if certain requirements are met. In accordance to the IRS, taxpayers can deduct points if the following is true:

  •     The loan is for the purchase or construction of the borrower’s primary residence
  •     Payment of points is an established business practice for homeowner’s area
  •     The points the homeowner claims fall within the typical range

The rules may differ from loan to loan however. For instance, home owners who have refinanced their loans and are paying points will need these points to be deducted monthly over the time period of a loan. The rules of a home equity loan on the other hand are applied differently - Points are deductible within the year that it is taken out and only when used to make repairs or improvements to a homeowner’s primary residence.

Although the tax benefits alone may not be enough for home renters to budge, this tax benefit is one of the few stepping stones loan borrowers may find beneficial to establishing their plans to owning a new home. Loan Love offers some last minute advice for potential homeowners, saying, “It’s little wonder that the mortgage interest deduction is held up as one of the primary advantages of home ownership, at least from a financial standpoint. Forbes estimates that middle-class homeowners were able to save about $615 on average during the 2012 tax season, thanks to the mortgage interest deduction. In fact, the mortgage interest deduction is the biggest personal tax deduction available to taxpayers. Its popularity with politicians has rarely dimmed and it is often help up as the pathway for making home ownership—and the American dream—attainable for the middle class.”

To learn more about the tax benefits of homeownership, please visit LoanLove.com to read the complete article.

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Kevin Blue
Loan Love
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