Tax Benefits Before you became a homeowner, your tax and insurance needs were probably pretty simple. An income tax form and some basic renters insurance were probably all that you needed. Things are a little more complex for homeowners, but there are some benefits too.
Federal Income Tax When income tax time comes, you will enjoy a reward for sticking to your home-ownership goals. You can subtract the interest you pay on your mortgage loan from your total income. This reduces the federal (and in most cases state) income taxes you owe. Over the years that you own your home, the home mortgage deduction can save you significant amount of money.
What You Can Take Off Your Taxes
• Points. In your first year as a homeowner, any points (advance interest) you paid to the lender as part of getting your mortgage loan also count as deductions from your income.
• Second mortgage. If you are paying a first and second mortgage loan on your house, you can also deduct the interest on your second mortgage from our taxable income.
• Property Taxes. You can deduct property taxes you pay to state and local governments from your federal income tax. State may also allow property tax deductions. Low-to moderate-income homeowners may qualify for reduced property taxes in some states.
• Moving expenses. If you moved because of your job, you may be able to deduct some of those expenses. You will need receipts for all of your moving costs. To figure out what is and is not deductible, you can call the Internal Revenue Service to ask for the publication about moving expenses.
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