There may be different tax deductions for purchasing a house. Deductions lower your taxable income and thus result in fewer taxes owed. It is useful to understand the tax advantages before purchasing a property or if analyzing renting versus buying. This article includes details on tax deductions for purchasing a house in PA.
Tax Deduction Factors
Not every home owner can use tax deductions for purchasing a house in PA. When completing taxes, you can opt for the standard deduction or itemized deductions, depending on which is more favorable. If you own an inexpensive home, the deductible figures may not add up to more than the standard deduction. Other personal variables could factor in as well. An accountant will offer a better understanding of the tax advantages of owning a property by taking into consideration your personal situation.
Qualified Home Costs
Only the interest portion of your loan payment is tax deductible. In the first few years of owning a home, you get charged a larger amount for interest than anything else. Therefore, the amount of interest is more significant when you first own a home than in subsequent years. Your mortgage company will send you a tax form every year summarizing the amount of interest.
Real Estate Taxes
Property taxes can also offer tax advantages. Property taxes are a yearly charge but are normally invoiced in smaller time frames. These taxes are often part of your mortgage monthly payment, but consider keeping records of the tax notices forwarded to you. The figure in the statement by your mortgage company may not be accurate, particularly if you closed on the home mid-year.
If you first purchased your residence within a special period of time and if you are under a qualifying income bracket, you can possibly deduct MI fees. Mortgage insurance is ordinarily invoiced at closing and on each mortgage payment for mortgages more than 80 percent of the home value and until the loan balance drops below a specific level.
Items Charged at Closing
Be sure to keep a record of your settlement paperwork. A variety of charges such as points, property taxes, and pre-paid interest can be important. Give the information to your accountant.
Tax Deductions For Purchasing A House In PA
The above tax deductions for purchasing a house in PA is applicable to primary homes. If you have investment property, the list of deductions vary. This is provided only as a basic overview. Always speak with a tax professional for sound advice tailored to your individual situation.