Home ownership and Taxes are like love and war; there will always be both. What you will also always have are the myths of home ownership and taxes floating around. I can still hear my economics college professor telling us in class one day about the huge tax benefits of owning a home and the tax breaks that every home owner gets. Now, I don’t know if slipped up that day, but I wasn’t too naive to think that every homeowner gets tax breaks. But what I did learn that day was to trust but verify what others tell me about owning a home and taxes.
Mortgage Interest Will Lower Taxes – Not Always
There are a few inaccuracies about owning a home and the possible tax breaks you might get as a homeowner. The first myth is mortgage interest lowers taxes. While this is true for many homeowners there are a few cases where mortgage interest doesn’t help you. The first case is when someone buys a home near the end of the year hoping for the big tax break bonanza. Well, in order to take advantage of the tax breaks for the mortgage interest, that amount of money has to make up and exceed the single or married couple standard deductions to have it stick. If it doesn’t you will have to look for other deductions to allow you to itemize.
Another case where mortgage interest as a write off won’t be too beneficial is in the case where someone is getting ready to pay their mortgage off because they have had their mortgage a long time. At this in the mortgage payback process, very little payment goes to interest while a lot of the payment goes to the principal balance. While great for paying off the house, not so great for the itemized deduction.
Mortgage interest is one of the items that get itemized and in a normal 12 months schedule contributes to an itemized tax return. However, in the case where someone bought a home at the end of the year, there is no mortgage interest to speak of. In this case, if the itemized deductions do not exceed the standard deductions given to single and family filers, then the mortgage interest as professed by so many people won’t help you on your taxes.
Home Costs Are Tax Deductible
How many times have I heard this one? All too often I have heard from first time home buyers while I was pre qualifying them for a home purchase that they can’t wait to do their taxes to write off their home expenses where they couldn’t as a renter. Exciting as it is to be able to write off some of the home’s expenses not everything applies. I have said to more than one new homeowner, if you don’t have someone helping with your taxes, then you should get some guidance so you don’t start trying to write off more than you can chew.
Right off the top of my head here are some things that are not tax deductible, or you should do some checking before you try to write them off. These items home improvements like replacing your roof, or replacing toilets with water saving toilets, home owners association fees, hazard insurance premiums. You may be able to write off Private Mortgage Insurance – PMI – if you have bought a home since January 1, 2007 and meet some other requirements relating to income.
Home Ownership Brings Pride Of Ownership
Owning a home is a great feeling. I enjoy owning my home, and I especially enjoy having people over to my home. Each time someone comes to my for a visit it is opportunity to talk about something from the past – the places I’ve lived, the people I’ve known. Renting a home is different, for me, it just doesn’t quite get to the heart of the matter of owning where I live and the pride that gives me. You can have this too – own a home – just don’t try to write everything off on your taxes.