There are a variety of financial benefits associated with purchasing and owning a home. Some of the most basic aspects of buying and owning a home can be financial advantages if you know how to use them.
The interest on your mortgage can be a tax write-off!
For example, did you know that depending on circumstances, you may be able to use the interest on your mortgage loan as a tax write-off? While we are not dispensing tax advice here, there is much to be gained by being familiar with tax laws and how they can affect you in the home loan process.
Let’s look at the IRS official site (www.IRS.gov) on the subject of mortgage tax write-offs as they applied for tax year 2015:
“Generally, home mortgage interest is any interest you pay on a loan secured by your home (main home or a second home). The loan may be a mortgage to buy your home, a second mortgage, a line of credit, or a home equity loan.”
To write off your mortgage interest, you must meet certain conditions.
In 2015, the following tax information applied according to IRS.gov - borrowers were free in 2015 to deduct home mortgage interest if all the following conditions are met:
-The borrower filed Form 1040 and itemize deductions on Schedule A (Form 1040).
-The mortgage is a secured debt on a qualified home in which you have an ownership interest.
The IRS says that a mortgage is a secured debt if “you put your home up as collateral to protect the interest of the lender. The term “qualified home” means your main home or second home”. The IRS adds, “You may be able to claim a mortgage interest credit if you were issued a mortgage credit certificate (MCC) by a state or local government.”
Writing off your mortgage interest can help your financial bottom line.
The ability to deduct mortgage loan interest, in whole or in part, is a very important factor in the decision to purchase a home. This can factor into your budgeting and planning for how to deal with mortgage loan fees, insurance, and other expenses. Some borrowers adjust the amount of the down payment they are able to make based on the anticipation of the tax savings they get from such deductions.
Planning ahead for your mortgage loan in this way can be very important when trying to figure out your financial bottom line. Do you know how much you can potentially save using such tax advantages? Tax laws change frequently so it’s very important to check with the IRS, tax preparer or tax expert to see how the most current year’s tax laws may affect how you may take such deductions. Tax write-offs are only one of many benefits of purchasing and owning a home. Check out our next installment for one more great advantage that comes with being a homeowner.
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*The information in this article has been provided strictly for educational purposes.