First time Diva Dwellers come into the process of buying a home without truly realizing the full tax benefits as it applies to their monthly payment. They are looking at what they can afford monthly and still have a little safety net in case something happens. You know, roof opens up and water pours in, your sewer breaks, or you want to remodel that oh so fabulous 1980s kitchen. Regardless of the reason it is critical that Diva Dwellers feel comfortable with their monthly expenditures. One thing that many of them do not realize is that a major benefit of owning a home is the direct tax benefits.
First off – always talk to a tax professional. Us Divas can only state from our own experience of owning homes and how we have benefited from the tax deductions. One can also go to the IRS Publication 530 for a more involved view of Tax Information for Homeowners. Below is a quick run down of what you can deduct as a Diva Dweller.
- Mortgage Interest: Let’s assume its your own personal residence. Investors are in a totally different category. Get this – 100 percent of the mortgage interest you paid before December 31, 2011, is deductible on your 2011 taxes. Every January one’s mortgageÂ lender will send you (email, online or snail mail) a form detailing out the amount one paid in interest. The first five years of home ownership majority of Diva Dwellers are paying interest on their loan. Its not until much later that you are starting to payoff that principal.
- Property Taxes: Super exciting – 100% of your PROPERTY TAXES you paid to your state, city, and county are also tax deductible.
- Closing-Costs: This is where keeping your final HUD-1 statement from your escrow signing is super critical. The discount points and origination fees paid to your mortgage lender at closing are typically deductible. Also, state and local transfer or stamp taxes paid at closing are generally deductible on your federal returns. Once again a tax professional is your friend on this one for the very nitty gritty specifics.
OK – you understand it from a super big awesome tax return perspective but how would this help with your monthly payment. Here is how it goes = Now that you are a Diva Dweller you can deduct less monthly from your tax deductions from your paycheck. Once again check with a professional on the specifics. But hypothetically your total payment is $2,200 a month. Around $200 of that is a tax deduction. Meaning money in your pocket. Meaning you can deduct less from your paycheck to cover your taxes. Meaning – spend that money on improving your home!