Do you know the difference between tax deductions and tax credit?
- A tax deduction reduces your taxable income–less income to tax means less tax you pay.
- A tax credit is a dollor-for-dollar reduction in your taxes due.
The following is information homeowners should know about tax breaks:
- Property Tax - Property or real estate taxes are fully deductible. Any local, city, or state property tax refund reduces your federal property tax deductions by an equal amount.
- Mortgage Loan Interest – This is one of the most significant tax breaks, especially during the early years of your loan term. That’s when the majority of your mortgage payment goes to interest. On average, homeowners can save about $2,000 per tax return by deducting their mortgage interest.
- Points on Your Mortgage Loan - The points you paid on your home may be deductible through the duration of the loan term.
- Tax Credit for First-Time Homebuyers – First-time homebuyers are eligible for a tax credit of up to $8,000. They cannot have owned a residence for the past 36 months.
- Tax Credit for Current Homebuyers - Current homeowners may be eligible for a tax credit of up to $6,500. They must have owned a primary residence for five consecutive years of the previous eight years.
- Home-Based Business Deductions - Home-based business owners who use a precentage of their home exclusively for their buisness can deduct the same percentage of certain home-based expenses. Such expenses include a percentage of insurance and repair costs, utility bills, home improvements and depreciation.
Of course, it is always a good idea to consult with a qualified CPA or Tax Preparer before making any tax decisions.
Gary Boyer provided information for this article. He may be reached at: www.republic-mortgage.com/gboyer/ or 801-479-0600.
Avg. Sales Price: 379,000
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