Among the many benefits that home ownership brings, tax deductions are on top of the list. For this reason, experts are suggesting that the best time to leave rent behind and start buying is now. If your clients are considering purchasing a home, make sure to go over these benefits with them.
Even though it’s no surprise that renting a house doesn’t build equity, most people forget the relevance of the matter. Home equity is the difference between the market value and the unpaid mortgage loan balance. Owning a home earns you equity value that can be unlocked to pay for emergencies, home improvement or to consolidate other debts.
The main aspect of tax reduction is related to mortgage interest. When you make monthly payments, the part of that check that goes toward interest is tax deductible, unless your loan is more than $1 million.
Property taxes also signify a big deduction when you own a home. As long as you own your home, monthly loan payment taxes will be an annual deduction from your taxes. It’s important to keep in mind that this amount should be included on the annual statement you get from your lender, along with your loan interest information.
Even if you decide to sell your property, you will still be able to avoid taxes on the profit you make. According to the 1997 law, up to $250,000 of profit is tax-free as long as you lived in the property for two years. In addition, the IRS provides some tax relief if the sale is because of an unforeseen circumstance like a change in the owner’s health.