Home Buyer Tax Advantages

Did you know that you should buy a house for more than just a cool place to live? In this video, I’m going to show you how to maximize your real estate investment by taking advantage of tax write-offs. We’ll walk through the numbers and look at some examples so you know exactly what to expect.

Have you ever had your accountant tell you that you needed to buy a house? How about your parents? One of the reasons they say this is that they understand the tax advantages of owning a home versus renting one. Of course, remember that I'm not a tax professional. You should always consult your tax advisor as everybody has different individual situations. However, this will give you a good overview of the benefits you can expect.

Homeowner Tax Benefits

The very first tax benefit that you need to know about is that 100% of the interest paid on your loan as a primary residence is 100% tax-deductible. Let me explain how this works. If John Doe makes $50,000 a year and paid a total of $8,000 in interest over the year, he’ll be taxed at $42,000 instead of $50,000. This means he will receive some tax savings.

Your interest isn't the only thing that's tax-deductible; your annual property taxes are as well. So if John Doe’s property taxes are roughly $3,000 a year, he would be taxed at $39,000 as opposed to $50,000. Each year, your lender will provide you with a statement summarizing how much interest you paid in that year. You’ll want to give that form to your accountant in addition to your property tax bill.

Did you also know that some of your closing costs are tax-deductible? In the year that you purchased your property, you should have also given your closing statement to your accountant. There will be some write-offs included in that. The largest tax advantage of owning real estate, though, happens after you've lived in your primary residence for two years. Once you do, all gains are non-taxable up to $250,000 in capital gains. This means that if you sell your house for $250,000 more than when you bought it, that's tax-free money.

Making The Most Of Your Investment

Buying a house is exciting, but it is also an investment. Part of that investment is the tax savings. So if you had any additional questions on this particular topic or home buying in general, please reach out to me and I'd be happy to help you find the answer. I help people just like you buy and invest in real estate every day, and I would be honored to assist you.

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