Homeowner Tax Benefits On Home Purchase Versus Renting


This BLOG On Homeowner Tax Benefits On Home Purchase Versus Renting Was UPDATED And PUBLISHED On February 8th, 2020

What are the tax benefits for homeowners when buying a home and renting

There are so many advantages of Buying Versus Renting a home:

  • One of the top benefits is the homeowner tax benefits homeowners
  • Homeowner tax benefits do not apply to renters
  • Homeowner Tax Benefits are often ignored by home buyers, especially first time home buyers
  • Besides Homeowner Tax Benefits there are other great benefits of being a homeowner versus a renter as well
  • However, in this article, we will mainly concentrate on Homeowner Tax Benefits

In this article, we will discuss and cover the benefits of being a homeowner versus a renter.

Top Homeowner Tax Benefits For Home Buyers

Here are the various benefits of being a homeowner versus a renter:

  • Homeowner Tax Benefits
  • There are many more financial benefits to owning a home versus renting besides Homeowner Tax Benefits

Homeowners have the luxury to do decorations to their home:

  • They do not have to ask for permission from the landlord or property management company
  • Homeowners own place and freedom to raise their children and family
  • Owning your own home gives the freedom and right without asking landlord in being able to spend time with family, relatives, friends

Homeowners do not have to ask permission from the landlord on friends and family staying over on an extended stay.

Financial Benefits On Top Of Tax Benefits In Owning A Home

There are many more benefits to buying a home versus renting.

  • Tax Benefits can save homeowners tens of thousands of dollars
  • The interest on monthly mortgage payments can be deducted from income tax returns
  • The Tax Benefits is great savings for every homeowner where it does not benefit renters

The majority of our monthly mortgage payments after getting a home loan will go towards interest payment of the mortgage.

Mortgage Interest Rate Deductions From Income Tax Returns

How to deduct mortgage rates from income tax refunds

Here is how Tax Benefits work with interest expense:

  • Tax Benefits is only available to homeowners and not renters
  • When purchasing a new home and have a mortgage, the majority of monthly principal and interest payments will go towards the interest of the mortgage
  • In the event, if the loan balance exceeds $1,000,000, the Internal Revenue Service will be limited interest deductible
  • Home equity debts that are up to $100,000 are also deductible on income tax returns
  • This means that on a cash-out refinance the mortgage or second mortgage/Home Equity Line Of Credit, those mortgage interest can be deductible as well

Mortgage Interest is also deductible on second and vacation homes as well as other homes a borrower has.

How Is Property Taxes Treated With Deductions Of Homeowners

Here is how Homeowner Tax Benefits work with property taxes:

Homebuyers who put less than 20% down payment on Conventional Loans need to have their property taxes and homeowners insurance in escrow.

Escrows are part of their monthly mortgage payment.

Monthly mortgage payments consist of the following:

  • Principal payment
  • Mortgage interest payment
  • Property taxes
  • Homeowners insurance

Homeowners can deduct their property taxes on their income tax returns as long as they own the property.

How Discount Points Can Be Homeowner Tax Benefits

Discount Points is when a home buyer pays a premium upfront in order to get a lower mortgage interest rate. One discount point is equivalent to 1% of your mortgage loan amount.

Here how Homeowner Tax Benefits work with POINTS:

  • A borrower can deduct discount points they have paid to lower their mortgage interest rates on the year that the borrower paid for
  • This can be used only if the mortgage loan was for a primary owner-occupied residential mortgage
  • Borrowers who went through a refinance mortgage loan or had to take out a second mortgage or a Home Equity Line of Credit and paid down their interest rates with discount points can deduct the points they paid
  • It is recommended that borrowers contact their accountant for clarification and what applies to them
  • Not everything is tax-deductible
  • Borrowers should not assume that a loan officer’s opinion is right when a loan officer tells you homeowner tax benefits
  • Second opinions are always recommended when making such a big financial decision

Qualifying For A Mortgage With The Right Lender

How to qualify for a mortgage with the right lender

If you have any further questions on this article, please contact Gustan Cho Associates. Gustan Cho Associates at Loan Cabin Inc. is a national FANNIE MAE, FREDDIE MAC, GINNIE MAE lender licensed in multiple states. We have a national five-star reputation for no lender overlays.

Here are some of the loan programs Gustan Cho Associates Mortgage Group are experts in:

  • FHA  And VA Loans With No Lender Overlays
  • FHA And VA Loans With Bad Credit
  • FHA And VA Loans With 580 Credit Scores
  • USDA With Lender Overlays
  • Conventional Loans With No Overlays
  • Non-QM Loans
  • Jumbo Mortgages with 5% down payment and no mortgage insurance
  • Reverse Mortgages
  • FHA 203k Loans

Gustan Cho Associates Mortgage Group

  • Email: gcho@gustancho.com
  • 262-716-8151 Please Text For Faster Response With Contact Information Including Email Address
  • Available 7 days a week, evenings, weekends, and holidays to take calls from 50 states

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