There are traditionally many real estate ownership tax benefits through use of tax deductions. Deductions lower your taxable earnings and therefore result in lower taxes. It is helpful to understand the tax impact before purchasing or when evaluating renting vs. buying. This article offers an overview of Woburn MA real estate ownership tax benefits.
Tax Deduction Factors
Not everybody can claim tax deductions. When completing your taxes, you can use the standard deduction or itemized deductions, whichever is more favorable. If you own an inexpensive home, the deductible expenses may not total higher than the standard deduction. Other financial variables could impact these figures as well. Only an accountant can provide a true understanding of the tax advantages of purchasing a property taking into consideration your personal situation.
Deductible Home Expenses
Mortgage Interest
Only the interest portion of your loan payments are tax deductible. In the first few years of owning a home, you pay more in interest than anything else. As a result, the amount of deductible interest is much higher when you first own a home than in later years. Your loan provider will mail you a statement every year totaling the mortgage interest paid on your property.
Municipal Taxes
Real estate property taxes can also be tax deductible. Real estate taxes are an annual charge but are generally due in quarterly time frames. These taxes are sometimes included in your mortgage monthly payment, but retain copies of the property tax statements mailed directly to you. The total in mortgage statements may not detail the full calendar year.
Mortgage Insurance
If you first purchased your home within a certain time frame and if you are part of a certain income bracket, you may be able to deduct MI payments. MI is charged on a monthly basis for mortgages more than 80% of the home price and continues until the loan balance decreases to the 80% mark.
Closing Costs
Consider keeping a copy of your closing settlement statement. A variety of charges such as points, adjusted real estate taxes, and pre-paid interest can be deductible. Give the documentation to your accountant.
The above is an overview of Woburn MA real estate ownership tax benefits and is applicable to primary residences. If you own investment property, the variety deductions differ. The above is meant solely as a general overview. Always speak with a tax professional for expert guidance adapted to your individual situation or to your type of residence.
