If you’re a homeowner, you’ve likely heard about the many tax benefits of owning a home. But how exactly do mortgages help you save? From deductions on home loan interest to credits for energy-efficient improvements, there are quite a few ways that homeowners can save money on their taxes. In this article, we’ll explain the top tax benefits of owning a home so you can make sure your mortgage is as cost-effective as possible.
One of the biggest tax benefits of having a mortgage is the interest deduction. Homeowners can deduct up to $750,000 (or $375,000 if filing separately) from their annual income on their taxes for mortgage interest payments that they made throughout the year. This means that if you paid $7,500 in mortgage interest during the year and your total taxable income was $100,000, then your taxable income would be reduced to $92,500. Depending on your tax bracket, this could mean significant savings at tax time.
Another way mortgages can help you save on taxes is through property taxes. Property taxes are deductible as well and can result in some serious savings when it comes time to file your return. The amount of property taxes you can deduct depends on the assessed value of your home and local tax rates in your area. For example, if the assessed value of your home is $250,000 and local property taxes are 2%, then you may be able to deduct up to $5,000 from your total taxable income every year ($250,000 x .02 = 5).
Finally, homeowners who make energy-efficient improvements to their homes may be eligible for certain credits when filing their taxes. These credits usually come in the form of rebates or deductions for certain types of improvements such as solar panels or insulation upgrades. The amount of these credits varies depending on several factors including which type of improvement was made and how much it cost. It’s important to do research before making any energy-efficient improvements so that you know what types of credits may be available when it comes time to file your return.
As you can see there are many ways that having a mortgage can help homeowners save money on their taxes each year. From deductions on home loan interest and property taxes to credits for energy-efficient improvements – being a homeowner has plenty of financial perks! So if you’re looking for ways to maximize your savings at tax time – consider taking advantage of the numerous tax benefits available through mortgages!