Buying a home is one of the most expensive purchases the average person will make in their lifetime but it can also be very rewarding at the same time.
Although the average home can cost between two hundred thousand and six hundred thousand dollars, depending on where you live, there are some perks! The government does offer tax breaks for homeowners that make it more appealing to buy a property. Due to historically low mortgage interest rates and the impact of COVID-19, home prices have increased dramatically in most markets, but it’s not impossible to become a homeowner.
Depending on where you live, here are some tax benefits you can take advantage of as a homeowner:
Mortgage Interest
Most people who purchase a home do so through a mortgage. This ensures that they can buy a home, even without hundreds of thousands of dollars in the bank, and can afford to keep making payments on it instead of paying rent somewhere.
If for example you live in the United States, mortgage interest is a tax benefit that allows you to claim a deduction on how much interest you've paid off of your mortgage. Since the interest on mortgages can be extremely expensive, adding on a lot of cost to how much a home is, this perk can be nice to have.
If you're filing on your own, homeowners can deduct $375,000 per person, but if you're part of a couple, the deduction doubles. This can be incredible especially if you have many other bills to pay, including your property tax, during this time of the year.
Home Equity Loan Interest
This deduction used to be more general, but now it can only be taken out if you've borrowed funds to make improvements on your property. This ensures that you can increase the value of your home and keep it competitive on the market without having to deal with the full cost.
This deduction doesn't cover everything, of course, or people would be snatching up Halton real estate to flip and make a profit, but it does help out in many situations where money is tight, and you need that extra boost of cash to complete your home improvement project.
Fortunately, if you don’t need a loan to improve your home, there are still tax benefits that can leave you in the green.
Necessary Home Improvements
Necessary home improvements can qualify as tax deductions. Having your home improvements covered by the government sounds fantastic! However, what's deemed 'necessary' is important to consider. For example, if you upgrade your kitchen to make it livable, you can claim a tax deduction, but if you upgrade a kitchen that was already fully functional, you won't qualify. This benefit is in place to ensure that those who truly need help can seek it out and have it.
Suppose you're not sure that the help you need will qualify for this type of deduction; perform the research ahead of time to see what it covers in more depth. There are many rules surrounding utility, the longevity of use, and how soon you can sell your home after receiving this discount.
Homeownership is expensive! There's no way to avoid that. But by paying attention to the discounts you can receive and listening to professionals who understand the importance of this type of deductible, you can save money while also improving and updating your home.
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