There are typically many typical tax advantages for buying a property through use of tax deductions. Deductions lower your taxable income and therefore lead to lower taxes. It is useful to understand the tax impact before buying or when evaluating renting versus buying. This blog post offers information on Burlington MA typical tax advantages for buying a property.
Tax Deduction Criteria
Not everybody can use tax deductions. When preparing your taxes, you can opt for the standard deduction or itemized deductions, whichever results in less taxes. If you own an inexpensive home, the deductible costs may not total higher than the standard deduction. Other personal variables may come into play as well. Only a tax advisor can offer a true evaluation of the tax advantages of buying a home taking into account your personal finances.
Deductible Home Expenses
Only the interest portion of your mortgage payments are tax deductible. In the early stages of owning a property, you pay more towards interest than principal. Therefore, the amount of deductible interest is significant when you first own a property than in later years. Your mortgage company will send you a statement every year outlining the mortgage interest paid on your home.
Real Estate Taxes
Real estate property taxes can also be tax deductible. Real estate taxes are an annual amount but are commonly invoiced in quarterly statements. These taxes are sometimes included in your mortgage monthly payment, but hold on to copies of the property tax bills mailed directly to you. The amount in mortgage statements may not detail the full calendar year.
If you bought your property within a designated time frame and if you are part of a specified income bracket, you can possibly deduct MI fees. MI is invoiced on a monthly basis for loans more than 80% of the market price and remains until the loan balance drops below the 80% mark.
Points and Other Fees
Consider keeping a copy of your closing settlement statement. Certain charges such as points, adjusted real estate taxes, and pre-paid interest may be deductible. Furnish the paperwork to your accountant.
The above is information on Burlington MA typical tax advantages for buying a property and is relevant to primary residences. If you purchased investment real estate, the variety deductions may be different. This information is meant strictly as a general overview. Always consult with a tax professional for solid information tailored to your personal profile or to your type of residence.