Buying a house is exciting, but did you know it’s not all about just getting a cool place to live? In this video, we’re going to talk about the tax benefits that come with homeownership. I’ll explain how you can benefit from your investment by understanding everything you can take advantage of.

Deducting Interest

Have you ever had an accountant tell you that you had to buy a house? Have you had your parents tell you the same thing? One of the reasons they’re saying that is because they understand the tax benefits of owning a home.

The first tax benefit is that 100% of the interest you pay on your primary residence is tax-deductible. I’ll explain exactly how this works. Let’s say that John Doe makes $50,000 a year. Over the 12 months, he's paid about $1,000 worth of interest on his mortgage. This would mean that John's paying taxes on $42,000 instead of the $50,000. Why? Because he was able to write off the $8,000 that he's paid towards the interest on his mortgage.

Deducting Property Taxes

Did you know that your property taxes are also tax-deductible? So let's just say that, in John's case, his property taxes are about $3,000 annually. That would mean that John's taxable base goes down to $39,000 instead of the original $50,000. Since he writes off $1,000 in interest plus another $3,000 in property taxes, this means he's paying taxes on $39,000 instead of $50,000 at the end of the year.

Every year, your lender will provide you with a statement of how much interest you paid towards your mortgage. You need to give that to your CPA, accountant, or bookkeeper—whoever's doing your taxes—to make sure you get that deduction. Make sure you also get the property tax bill from the county to give to your accountant.

Additional Writeoffs

Did you also know that some of your closing costs are tax-deductible in the year that you buy your house? You have to make sure you give your closing statement to your tax preparer. They'll tell you what to do to make sure that you write off whatever you can.

Do you want to know what the real tax advantage is when you own real estate and live in your house for longer than two years? You have 0% capital gains on that appreciation. The only time you have to pay any taxes on the appreciation is when it goes over $250,000. In other words, anything under is pure profit.

Making The Best Use Of Your Investment

Buying a house is super exciting, but it's always important to know that there are huge tax advantages to purchasing a home. If you have any additional questions, please reach out to me or the team and we would be happy to guide you. We want you to get the most out of your home—which is primarily an investment.

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