By The Kent Redding Group
AUSTIN, TX. - Are you planning on buying a home in Austin Texas? If so, there's never been a better time than right now to buy a home especially thanks to the fact that home ownership offers so many tax breaks.
To learn more about the tax breaks you can enjoy as a homeowner, especially when you file next year, this article will break down those tax breaks and the financial advantages of home ownership.
Tax break 1: Mortgage interest
This continues to be the biggie benefit of owning a home for tax year 2017: the ability to deduct the interest on a mortgage of up to $1 million. And the more recent your mortgage, the greater your tax savings.
"The way mortgage payments are amortized, the first ones are almost all interest," says Wendy Connick, owner of Connick Financial Solutions.
Here's how this deduction looks for a married couple in the 28% tax bracket (that means a joint annual income between $151,201 and $230,450) who bought a home with a $300,000, 30-year mortgage at a 4% interest rate. They will pay $11,904 in mortgage interest their first year. Once you add in the other itemized federal deductions below, these homeowners can expect to save at least $3,333 in taxes during their initial year of ownership.
What changes next year: The new tax bill allows homeowners with a mortgage that went into effect before Dec. 15, 2017, to continue to deduct interest on loans up to $1 million. But for anyone who closed on a mortgage after that, the cap for deducting interest becomes $750,000—and that's a combined total for first, second, and any other homes.
Tax break 2: Property taxes
In most instances, property taxes are deductible on your 2017 tax return, says Brian Ashcraft, director of compliance at Liberty Tax Service. And that could spell hefty savings.
According to the U.S. Census Bureau, the average household property tax is $2,127. If you have a mortgage, your taxes are built into your monthly payment. Here's more info on how to calculate property taxes.
What changes next year: Property tax will no longer be a separate deduction. Instead, taxpayers can take one deduction that includes property tax as well as state and local sales and income taxes, says Ashcraft. And that one deduction is capped at $10,000 for those married filing jointly.
Tax break 3: Private mortgage insurance
If you put less than 20% down on your home, odds are you're paying private mortgage insurance, or PMI, which costs from 0.3% to 1.15% of your home loan. While the deduction had expired, the new tax bill retroactively made the deduction available for the 2017 tax year.
Here's how much you'll save: If you make $100,000 and put down 5% on a $200,000 house, you'll pay about $1,500 in annual PMI premiums and thus cut your taxable income by $1,500.
What changes next year: This deduction is for itemizers only. Plus, the 2018 tax law nearly doubles the standard deduction. As a result, it is estimated that only about 5% of taxpayers will itemize deductions starting in 2018, says Connick. "In the past it was more like 30%," she adds.
Search For Homes In Austin Texas
To get started with searching for a home in Austin Texas, or to learn more about selling your home, contact the Kent Redding Group today by calling us at (512) 306-1001 or click here to connect with us online.