There may be many common tax benefits for buying real estate. Deductions minimize your taxable income and therefore lead to less taxes owed. It is important to understand the tax implications before purchasing a home or when weighing renting versus owning. This blog post offers an overview of common tax benefits for buying real estate in Waltham MA.
Tax Deduction Requirements
Not every home owner can benefit from common tax benefits for buying real estate in Waltham MA. When completing taxes, you may opt for the standard deduction or itemize your deductions, whichever calculates to lower taxes. If you own a low priced home, the deductible amounts might not total more than the standard deduction. Other personal figures can come into play too. A tax consultant will give you a better understanding of the tax benefits of purchasing a property by reviewing your personal figures.
Home Ownership Expenses that Might Qualify
Only the interest portion of your mortgage payment is tax deductible. In the first few years of home ownership, you contribute more in interest than anything else. Therefore, the total paid towards interest is higher when you first own a home than in later years. Your loan provider will send you a tax form every year outlining the amount of interest.
Municipal taxes are also be tax deductible. Real estate taxes are an annual calculation but are traditionally billed in quarterly increments. These taxes can be part of your mortgage payments, but retain records of the tax bills mailed to you. The amount in the statement by your mortgage company may not be accurate, especially if you purchased the home during the year.
Lenders Mortgage Insurance
If you bought your residence within a specific period of time and if you are under a certain income bracket, you may be able to deduct MI fees. MI is usually due at settlement and on a monthly basis for mortgages more than 80 percent of the market price and continues until the loan balance drops below the 78% mark.
Closing Related Fees
You should retain a record of your closing statement. A variety of charges such as points, adjusted real estate taxes, and pre-paid interest may be used. Give the documentation to your accountant.
Common Tax Benefits For Buying Real Estate In Waltham MA
The above common tax benefits for buying real estate in Waltham MA is applicable to primary residences. If you have investment homes, the potential deductions can be different. This information is meant only as a generic introduction. Always ask a tax advisor for solid guidance specific to your personal situation.