Top 4 Tax Benefits for Recent Home Buyers

Achieving homeownership is a significant milestone, but it also involves financial commitments like loans and mortgages. Once these are in place, homeowners can often access various tax advantages that help ease their financial burden. These benefits are not automatically deducted; homeowners need to claim them during tax filing. Taking advantage of these deductions can lower your overall tax bill and free up funds for mortgage payments or other expenses.

Here are four key tax advantages for new homeowners.

Property Tax Deductions

Property taxes are levied on real estate transactions. If your property is financed through a loan, the tax amounts paid are often collected in advance by your lender along with monthly payments. These annual property tax payments can be claimed as deductions on your tax return, reducing your taxable income.

Mortgage Insurance Deduction

For loans with less than a 20% down payment, private mortgage insurance (PMI) is required. Although paid by the borrower to protect the lender, this insurance premium is also tax-deductible, offering some relief to homeowners.

This section also discusses other deductions such as:

Points earned during the mortgage process, which can reduce your interest rates and be claimed on taxes.

Mortgage interest paid, especially in the early years when interest payments are higher, can be deducted to lower tax liabilities.

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