Are you a new homeowner or ready to be a homeowner? Homeownership may seem financially scary, but there are a lot of benefits compared to renting. You can decorate or renovate your home any way you want, no more noisy neighbors who live above you and you can gain tax advantages.
Yes, tax breaks! There are tax advantages to homeownership. Don’t miss out on these three deductions that can put money back in your pocket.
3 Tax Advantages of Owning a Home
1. Mortgage Interest Tax Deduction
Mortgage interest is any interest you pay on a loan affixed to a primary or second home.
As a homeowner, you can itemize your deductions to reduce your taxable income by deducting any interest paid on your home mortgage. The deduction is limited to interest paid on up to $1 million (or $500,000 if you are married and filing separately).
2. Property Tax Exemptions
You may also be eligible for a tax break for the land that your home rests upon. Homeowners who itemize deductions can also reduce their taxable income by deducting property taxes.
One of the most commonly known property tax exemptions in Ohio is The Homestead Exemption, which allows low-income senior citizens and permanently and totally disabled Ohioans to reduce their property taxes. This exemption also benefits veterans who are rated as 100% disabled by the VA. These homeowners can be exempt up to $25,000 of the market value of their home from all local property taxes.
The exact savings of property tax exemptions vary depending on the location of the property.
3. Home Equity Loan Deduction
The interest paid on a home equity loan or line of credit used for renovations also may be deductible on your taxes, just as the interest paid on the primary loan take out to buy the home. This deduction has a limit of $100,000 (or $50,000 if you are married and filing separately). Note: Next year, for your 2018 taxes filed by the April 2019 deadline, this deduction will no longer be available.
It Pays to Own Your Home
Owning a home is a financial responsibility that has many advantages. Be sure to do your research on home ownership and talk to your tax advisor to determine your eligibility for home ownership tax deductions.
Taxes are constantly changing. While this blog is meant to help you best manage your finances, it’s for informational purposes only and shouldn’t be seen as tax advice. Talk to your tax professional if you have questions about your taxes.