There are many benefits associated with homeownership. The American Dream offers financial gain, stability, and many social benefits. One of the biggest benefits associated with homeownership can be found when filing your taxes and, depending on your situation, there may be thousands of dollars coming back your way.
“Homeownership is an investment in your future,” said Jefferson-Lewis Board of Realtors President Vickie Staie. “It is where we make memories and feel comfortable and secure, it strengthens communities, and it offers homeowners financial security. Tax breaks are just one of many benefits of being a homeowner, and even those who have owned a home for years may be unaware of all of the opportunities for savings.”
As the deadline to file taxes approaches, the Jefferson-Lewis and the St. Lawrence County Board of Realtors want to remind homeowners of the many tax benefits, savings and deductions they can take advantage of simply by owning a home.
The mortgage interest deduction (MID)
This may be the most notable and advantageous tax benefit that homeowners enjoy. The MID allows homeowners to deduct the interest paid on a mortgage debt of up to $1 million on a primary residence and one additional residence. It is especially helpful in the early years of a mortgage when the monthly payment goes largely toward interest.
It is widely known that being a homeowner means paying taxes on your property to local government, whether it is the city, county or state. What you might not know is that these taxes are entirely deductible from your federal income tax, which is more great tax news for homeowners.
Mortgage insurance premium deduction
Homeowners with incomes of no more than $100,000 can deduct their mortgage insurance premiums if they were required to obtain insurance as a condition of receiving financing for the home. With the current obstacles that prospective homebuyers face, such as student loan debt, the deduction is a benefit that can save homeowners a great deal of money.
“If you are on the fence about buying a home, taking advantage of these tax benefits can help put your dream home within reach,” said Debbie Gilson, president of the St. Lawrence County Board of Realtors. “By working with a Realtor, a member of the National Association of Realtors, you can better understand the home-buying process and the many benefits that come with owning a home.”
Congress is considering eliminating or curtailing some or all of these tax benefits. Members of Congress from both Houses and both parties have expressed a high level of interest in reforming the tax system. Many Washington observers point to Republican-control of the House, Senate, and White House as the primary reason a version of tax reform may finally be enacted. Much work remains before any tax reform plan comes up for any votes. This ongoing debate places a variety of tax laws, including those affecting commercial and residential real estate, under increased scrutiny.
Realtors are working to preserve these benefits. American homeowners already pay between 80 and 90 percent of all federal income taxes. Without the MID, for instance, that figure could rise to 95 percent. It’s particularly troubling considering the fact that more than half of families who claim the MID earn less than $100,000 per year.
The state and local property tax deduction is essential to homeowners as well. While paying property taxes is a part of owning a home, knowing that those payments to state and local governments can be deducted from their federal income tax brings some peace of mind. Without that deduction, homeowners would get taxed on the income used to pay their property taxes. This is a form of “double taxation” that hits home for lower- and middle-income households.
The value of these tax incentives is already figured into home prices, meaning there’s a very real likelihood that eliminating those benefits could cause home values to plummet. Please contact Congresswoman Elise Stefanik and Senators Charles Schumer and Kirsten Gillibrand and let them know that these deductions are important and need to be preserved.