Tax Advantages Can Really Add Up

You can typically deduct or “write off” the following expenses on your taxes:

• Mortgage insurance is deductible but this may change (also depends on your income & loan amount)
• Property Taxes (typically this is several thousand dollars/year)
• If you are having a home built, the interest on the construction loan is deductible
• “Prepaid interest” which is a closing cost (for interest from the day you close til the end of that month)
• “Points” which are a charge to get your loan, may or may not be deductible (lots of rules on this one)
• Interest you pay every month  (this is the largest portion of your mortgage payment)

You normally cannot deduct:

• Homeowners Insurance
• Principal you pay on your mortgage
• Utilities like water, sewer, garbage, etc.
• Homeowners Association Dues for a neighborhood or condo complex

How much do your deductions save you in taxes? Let’s look at an example.  For your first year on a $150,000 mortgage you could have these deductions:

• About $8200 in interest payments to write off
• $1500 to $3000 in property taxes (depending on local tax rates)
• $340 in prepaid interest
• $750 of mortgage insurance

That’s a total of $10,800 to $12,000! With a household income of $60,000, that would lower your taxable income to less than $50,000, saving you $2750 on your tax bill. That translates to a savings of over $230 a month for buying a home!

Always discuss tax info with your tax advisor before making any decisions.

“Tax deductions,” also called “write-off’s,”  mean you subtract that amount from your income before calculating how much you owe in taxes.  A “Tax Credit” is even better because you get that amount taken directly off your tax bill or in a refund.

The first time home buyer tax credit offered earlier this year may have expired, but the many other tax breaks you’re given will will save you even more in the long run.

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