Tax Advantages of Buying a House

Go back to the Lesson Center

Lesson Rating

GD Star Rating

Share This Lesson

Share this with a Friend

Fill out the form below, and we will share this link with your friend.

  • The United States Government wants you to own a home! Homeowners create more stable communities so you’re given tax breaks for buying a home.

    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.

    Thinking of buying a home in the Portland, Oregon area? Checkout our First Time Home Buying Classes!

    Tax Advantages of Buying a House was last modified: May 1st, 2018 by David Axness

    Choose a state from the drop-down menu for specific state information related to this lesson.

    Post a Comment

    You must be logged in to post a comment.

    Contact Us

    My Fieldset
    1. (required)
    2. (valid email required)

    cforms contact form by delicious:days

    Your email address and personal information are confidential and will not be sold or rented by Fearless Homebuyer.

    Attend a Class   »