REAL ESTATE | HOME OWNERSHIP
HOW OWNING A HOME CAN HELP
REDUCE YOUR TAXES
BY LAWRENCE BELLIDO BROKER ASSOCIATE KELLER WILLIAMS ADVANTAGE III REALTY
ith tax season in full swing — that’s right, folks, April 15 is approaching rapidly — it’s a good time to talk about how owning a home affects your taxes. Clearly, owning a home is a smart financial decision in most circumstances. That’s because, as you pay down the mortgage, assuming the value of the house increases, the difference between what the house is worth and what you owe on it grows. That difference is known as “equity” and it’s a financial asset you own.
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MORTGAGE INTEREST DEDUCTION With every monthly mortgage payment, a substantial portion of the amount you pay is interest on the loan. At first, the interest is almost 100 percent of the payment amount then very gradually decreases over time. When you file your taxes, you can deduct the total amount of in-
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terest you paid over the year from your income. Because the tax rate is applied to a lower income figure, it reduces your tax debt.
PROPERTY TAX DEDUCTION When you look at your monthly mortgage statement, you'll see a figure that is paid toward escrow to pay your homeowners insurance and property taxes. The property tax amount, which typically goes to local and state governments, can also be deducted from your income when filing your taxes.”
HOME OFFICE DEDUCTION If you own a business and run it from home, you may be eligible to deduct a portion of what you pay on your home from your income. However, the filing requirements are very strict so you should let a professional CPA handle your taxes if this is an option you want to explore. Again, this is intended as a general overview and I strongly advise you to discuss this with your accountant, CPA, or financial advisor before making any important financial decisions. O
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There are also substantial tax advantages, known as “deductions,” that are available only to homeowners and they reduce what you owe on your taxes each year. By combining these tax savings with the growing equity, owning the home you live in is a great way to build wealth. Please note… before making any financial decisions based on the information below, consult with your CPA or tax advisor:
