Homeowners enjoy many financial advantages. These include significant tax benefits that reduce the overall cost of owning a home. In fact, the after-tax cost of home ownership is often lower than renting. Here are the basics everyone should know.
Interest Payments
Up to 100% of the interest you pay on your mortgage or home equity may be tax deductible. This is especially true in the early years of a home loan when most of your monthly payments are applied to interest.
Closing Costs
Many of the closing costs associated with buying a home may be tax deductible. For instance, you may be able to deduct the real estate agent's commission, attorney's fees, surveys, title searches, and transfer taxes.
Discount Points
When you buy a home, you might pay points — also called discount points — to the lender. A home loan may include one to three points, which are considered pre-payment of the interest on your mortgage. You may be able to deduct all of the points from your taxes in the year you paid them, or you may have to deduct them over the life of the loan.
Property Taxes
Any property taxes you are paying on your first or second home may be tax deductible.
Home Office
If you have a home office for your business, you may take advantage of home office tax deductions. This may include part of your utility bills or the cost of repairs.
Home Equity Loan to Pay Your Taxes
Short on money at tax time? If you own your own home, you may be able to use your home's equity to pay off your taxes. Interest rates may be lower than credit cards or personal loans. And, regardless of how you use the money, the interest may be up to 100% tax deductible1 on the following year's taxes.
If you're thinking about purchasing a new home, refinancing your current mortgage, or using your home's equity, Bank of America is here to help you get the loan that's right for you.
Be aware that the amount of your adjusted gross income can affect your ability to claim certain deductions, so speak to your CPA or tax advisor to explain this in more detail.2
