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Homebuyer Tax Advantages

February 4, 2021

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Did you know that buying a house comes with some amazing tax write-offs that homebuyers can take advantage of? In this episode of Naturally NWA, I’m going to walk you through the tax advantages associated with homeownership. I’ll help you understand how to maximize your real estate investment so you can get the most out of owning a home.

Homebuyer Tax Advantages

Buying a house is super exciting, but you should be doing it for more than just a cool place to live. In truth, a home is an investment. Have you ever had your accountant tell you that you need to buy a house? How about your parents? One of the reasons they are telling you that is because that they understand the tax advantages of owning a home versus renting a home.

The very first tax benefit you need to know about is that 100% of the interest paid on your loan as a primary residence is 100% tax-deductible. Let me show you how this works.

Let’s say John Doe makes $50,000 a year and has paid a total of $8,000 in interest over the year. John Doe will be taxed at $42,000 instead of $50,000, so he will receive some tax savings. Your annual property taxes will also be tax-deductible. If in the previous example, John Doe’s property taxes are $3,000 a year, then he’s going to be taxed at $39,000 instead of $50,000. Each year, your lender will provide you with a statement summarizing how much interest you paid in that year. You’re going to want to give that form to your accountant along with your property tax bill.

Did you know that some of your closing costs are also tax-deductible? In the year that you purchase your property, you should give your closing statement to your accountant as there are some write-offs included in that. The largest tax advantage when owning real estate, though, is capital gains. After you live in your primary residence for two years, all gains are non-taxable up to $250,000 in capital gains. This means that if you sell your house for $250,000 more than when you bought it, that’s tax-free money.

Making The Best Investment

Buying a house is exciting, but it’s also an investment. Part of that investment is in tax savings. If you have any additional questions on this particular topic—or any other home-buying questions—I’m happy to help you find the answer. I help people just like you buy real estate every day, and I’d love to assist you.

Don’t forget to subscribe to my channel so you never miss an episode of Naturally NWA, where we talk all about the Northwest Arkansas lifestyle. Make sure you stay tuned for my next episode!

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