Your taxes and home ownership
April 17, 2007
By 11:59 P.M. today Americans will have filed their 2006 Income Tax Forms. Since California is an Income Tax state, there are IRS Forms and California State Franchise Forms. For both resident homeowners and investor homeowners, both the state and federal governments encourage homeownership by allowing certain deductions for expenses incurred because of your home ownership.
When you finance a home with a loan, the interest you pay on the loan is tax deductible. The amount of your deduction is also likely to take you above the minimum itemized deductible threshold, which enables you to write off many other items as well.
What does this mean? The government is essentially subsidizing the purchase of your home.
Suppose you take out a $300,000 loan with an interest rate of 6%. Assuming your first payment is on January 1st, you will pay approximately $18,000 in interest on that loan in the first year. Your taxable income would be lowered by $18,000. Depending on your tax bracket,
you could save up to $6,000 that first year. Since you live in California and since California recognizes the home loan interest rate deduction, you will save even more.
In addition, your property tax payments are deductible on your Federal income tax return (not on your state return).
These are part of the yearly tax advantages of owning a home versus renting.
If you do not yet own a home and you had a huge tax liability this year, it is time to consider
contacting a professional real estate agent anad start your search for the home of your dreams. Perhaps not your "forever" home, but one that meets your presents needs and lifestyle.
By 11:59 P.M. today Americans will have filed their 2006 Income Tax Forms. Since California is an Income Tax state, there are IRS Forms and California State Franchise Forms. For both resident homeowners and investor homeowners, both the state and federal governments encourage homeownership by allowing certain deductions for expenses incurred because of your home ownership.
When you finance a home with a loan, the interest you pay on the loan is tax deductible. The amount of your deduction is also likely to take you above the minimum itemized deductible threshold, which enables you to write off many other items as well.
What does this mean? The government is essentially subsidizing the purchase of your home.
Suppose you take out a $300,000 loan with an interest rate of 6%. Assuming your first payment is on January 1st, you will pay approximately $18,000 in interest on that loan in the first year. Your taxable income would be lowered by $18,000. Depending on your tax bracket,
you could save up to $6,000 that first year. Since you live in California and since California recognizes the home loan interest rate deduction, you will save even more.
In addition, your property tax payments are deductible on your Federal income tax return (not on your state return).
These are part of the yearly tax advantages of owning a home versus renting.
If you do not yet own a home and you had a huge tax liability this year, it is time to consider
contacting a professional real estate agent anad start your search for the home of your dreams. Perhaps not your "forever" home, but one that meets your presents needs and lifestyle.
posted by shirley harry at 8:45 AM
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