What are the many tax benefits of owning a home? Find out how owning real estate might be able to ease your tax burden.
Tax Deductions and Benefits of Owning a Home
Owning a home offers a tremendous amount of tax benefits, such as deductions on real estate taxes, property taxes, and state and local income or sales taxes of up to $10,000, and mortgage interest. Read here how you can take advantage of these deductions to make sure you are getting all the benefits from your home ownership.
You can deduct the mortgage interest on your home when you itemize deductions. The deduction is capped at interest paid on no more than $750,000 of the principal. But, if you have a mortgage that originated before Dec. 15, 2017, you can continue to deduct interest on loans up to $1 million.
You can also deduct interest on the proceeds from an equity loan or line of credit used to improve your home, as long as the total principal from the first mortgage and the equity line don’t exceed the original mortgage or the $750,000 cap.
You may deduct a total of $10,000 of all taxes paid, such as real estate taxes, personal property taxes, and state and local income or sales tax. Taxpayers living in high income or high property tax states may be limited to a lesser amount of taxes than what was actually paid.
Private Mortgage Insurance (PMI)
Mortgage insurance premiums paid in 2020 may be deducted as mortgage interest. But the deduction is phased out where the Adjusted Gross Income (AGI) of a married couple filing jointly reaches $100,000 ($50,000 if married filing separately).
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