{"id":3370,"date":"2024-08-16T15:06:57","date_gmt":"2024-08-16T20:06:57","guid":{"rendered":"https:\/\/tomo.com\/blog\/?p=3370"},"modified":"2025-02-10T13:55:02","modified_gmt":"2025-02-10T18:55:02","slug":"what-are-the-tax-benefits-of-owning-a-home","status":"publish","type":"post","link":"https:\/\/tomo.com\/blog\/what-are-the-tax-benefits-of-owning-a-home\/","title":{"rendered":"What are the tax benefits of owning a home?"},"content":{"rendered":"\n

So, what\u2019s the deal with tax benefits for homeowners? Owning a home can score you some pretty sweet tax perks. You can usually deduct your mortgage interest, which is a big one for many people. Property taxes are also deductible, so you can write those off on your return. If you\u2019ve done any major home improvements, there might be some tax benefits there too. And if you\u2019re working from home, you can claim a home office deduction. Just keep in mind that these benefits can vary based on your situation and the latest tax rules.<\/p>\n\n\n\n

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How much can you save in taxes by owning a home?<\/h3>\n\n\n\n

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For most households, you can deduct interest on up to $750,000 of mortgage debt if you\u2019re married and filing jointly, or $375,000 if you\u2019re single. To claim this deduction, you\u2019ll need to itemize all your deductions on your tax return. Consulting a tax pro might be a good move, but you\u2019ll get a Form 1098 from your lender that shows how much mortgage interest you paid over the year\u2014this form is crucial for claiming your deduction. Most DIY tax prep websites are set up to account for these deductions. <\/p>\n\n\n\n

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So, what does that really mean? Well, everyone\u2019s situation will be different. But to give you a rough idea of how much you could<\/em> save, let\u2019s crunch some numbers on a 30-year conventional loan. Note that you save more during the first 10 years of the loan since you\u2019re paying more in interest during that time (vs. paying down the principal on the loan), but since most people tend to keep their loans for about 8 or so years (before they move or refinance), this is a good indication of how much you might save early on.<\/p>\n\n\n\n

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Home price<\/td>$200,000<\/td>$400,000<\/td>$600,000<\/td>$800,000<\/td>$1,000,000<\/td><\/tr>
Down payment<\/td>6.0%<\/td>6.0%<\/td>6.0%<\/td>6.0%<\/td>6.0%<\/td><\/tr>
Interest rate<\/td>6.0%<\/td>6.0%<\/td>6.0%<\/td>6.0%<\/td>6.0%<\/td><\/tr>
Estimated annual tax savings during the first 10 years.<\/td>$4,333 per year<\/td>$7,567 per year<\/td>$10,802 per year<\/td>$14,036 per year<\/td>$17,271 per year<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n

These numbers are sourced via this tax deduction calculator<\/a> from Freddie Mac, which you can customize in more detail to account for property taxes and the state and federal tax rate in your area. <\/strong>If you\u2019re still thinking about buying a home and want to see if the tax benefits make sense, a mortgage tax deduction calculator could help you estimate your potential tax savings by figuring out how much your mortgage interest and points could lower your taxable income. <\/p>\n\n\n\n

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It uses details like your loan amount, interest rate, and tax rates to give you a rough idea of your savings. Just input your mortgage info to see the estimate, but remember, it’s for general guidance\u2014always consult a tax advisor for precise advice.<\/p>\n\n\n\n

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How much can you deduct in property taxes?<\/h3>\n\n\n\n

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The SALT (State and local tax) deduction lets you deduct state and local taxes, including property taxes, from your federal taxable income. This can reduce your overall tax bill by lowering the amount of income that’s subject to federal taxes.<\/p>\n\n\n\n

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Here’s the catch: The Tax Cuts and Jobs Act of 2017 capped this deduction at $10,000 per year for individuals and married couples filing jointly. If you\u2019re married filing separately, the cap is $5,000.<\/p>\n\n\n\n

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So, if you live in an area with high state or local taxes, this cap might limit how much you can deduct, which can impact your overall tax bill. For example, if you pay $12,000 in state and local taxes, you can only deduct $10,000 of that on your federal tax return.<\/p>\n\n\n\n

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What is the home improvement tax deduction?<\/h3>\n\n\n\n

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The home improvement tax deduction is like a little bonus for homeowners who make upgrades that actually add value or extend the life of their home. So, if you\u2019re not just fixing things but seriously improving your place, you might be able to score a tax break.<\/p>\n\n\n\n

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What Counts:<\/strong><\/p>\n\n\n\n