Homeowners can save more through property tax deductions and more.
If you didn’t know yet the unique tax perks and savings homeowners get compared to renting, you’re definitely missing out. Many people worry about the financial strain of buying a home, thinking they can't afford it or don’t have enough savings, but if you look at the bigger picture, the benefits can actually outweigh the costs. Today, I have the pleasure of having Megan Ward, an expert financial adviser, to discuss how homeownership can help you gain access to tax perks, benefits, and savings. Here’s everything you need to know:
• Tax write-offs. When you're employed and receive a W-2, taxes are deducted directly from your paycheck. However, when you own a property, starting with your primary residence, you have opportunities for tax write-offs that can significantly lower your overall tax burden. Whether you’re employed or self-employed, the good news is that you can write off mortgage interest and property taxes.
"Understanding tax benefits could mean thousands in savings for homeowners, making buying a smarter choice than renting."
• Standard mortgage deduction vs. itemized deduction. In mortgage interest deductions, you must choose between taking the standard deduction or itemizing your deductions. With the recent increase in the standard deduction, some homeowners might find that their combined mortgage interest and state and local taxes—subject to the SALT cap—don’t exceed the standard deduction amount. We recommend working with a knowledgeable CPA or tax preparer to help you understand these rules and maximize your deductions, ensuring you get the most tax benefit possible from homeownership.
• SALT cap. While it’s easy to get caught up in the tax advantages of homeownership, there are some limitations based on the current tax laws. For example, the tax reform bill that went into effect in 2018 introduced the State and Local Taxes (SALT) cap, which limits deductions for state and local taxes to $10,000. In high-cost areas like San Diego or Southern California, where property taxes often exceed this amount, that cap can limit your deduction.
The key takeaway here is that owning a home offers some fantastic tax advantages that renters simply don't have access to. Often, people only think about the monthly mortgage payment versus rent and overlook the additional financial benefits that come with homeownership, such as tax savings. By understanding these benefits and how to leverage them, you can make more informed decisions about buying a home and managing your finances.
I hope you find this helpful. If you have any questions about this topic or if you’re interested in taking the first step to homeownership, feel free to reach out to me anytime. Just call 760-201-9252 or email me at [email protected]. I look forward to working with you!
