If you're a first-time buyer who's wondering, "Hey, what's in it for me, besides a big down payment and 30 years of monthly mortgage payments?" The answer is, tax breaks! Three major items are deductible from your income taxes:
These are substantial tax deductions. Just the mortgage interest alone is a hefty, annual tax break.
A hypothetical homebuyer, who takes out a 30-year loan for $120,000 at 7.5 percent interest, pays $8,957 in mortgage interest the first year. That�s a potential tax deduction of nearly $9,000.
You also might be eligible to deduct the purchase points for the year of your purchase. One point is equal to one percent of the loan amount, in this case $1,200. The only things you can�t deduct are your homeowner insurance, loan processing fees, or private mortgage Insurance (PMI). If you don�t itemize on your tax return now, and your home deductions exceed the 1999 standard deduction of $7,200 for married couples filing together or $4,300 for single filers, then there may be strong motivation for you to own a home from a tax standpoint.
You can also factor in non-home related deductions, such as charitable contributions, state income taxes and other deductions available to people who itemize.
So, you can see clearly that tax laws are structured to benefit homeowners.
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