Monday, December 1, 2008

Did you know about the Tax Benefits of HomeOwnership?

"Owning a home is a keystone of wealth...both financial affluence and emotional security"
Probably, one of the biggest dreams of an American is to own a home. And this is one of the most important decisions in terms of investment. But are you aware of the fact that borrowing to pay for one is a Taxpayer's dream? This is because home ownership is associated with many tax benefits.

Let me brief you with some of the tax benefits. However you are advised to consult a tax professional for further details.

Deduction of Mortgage Interest
For most people, the biggest incentive from owning a home is that the mortgage interest is tax-deductible. This deduction, which is applicable up to a limit of $1 million, applies to any type of home - like a new one, a second home or if you are refinancing. In case your mortgage loan exceeds the limit, then some of the interest will not be deductible. In addition to this, there's also "Home Equity Loan" exception, where you are allowed to deduct interest on an additional $100,000 debt for any purpose. But do remember that the loan is secured by your home, failure to pay the payments could make you lose your house to foreclosure.

Real Estate Tax Deduction
Homeowners are also provided with the facility of deducting their real estate taxes, irrespective of taxes imposed by the state, county, township or any other local government body. The only condition being that the person who owns the house can claim the deduction.

Deduction of Closing Cost
When you buy a home, you usually pay "points" to the lender. These 'points' are nothing but the fees charged by them when you are taking a loan secured by your home. Together with points, there are generally a number of closing costs. For example, the fees associated with attorney, title search, documentation, etc., all belong to the list of closing costs. You can also deduct points and the closing costs as mortgage interest, provided you meet certain requirements.

For further details and information on tax benefits do check out the favorable treatment of home ownership by Internal Revenue Service (IRS).

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