Homeownership Provides Tax Benefits
The U.S. Tax1 code supports the American Dream of homeownership. Tax breaks can save you thousands of dollars from closing costs to property taxes.2 Your lender is required to issue a 1098 Mortgage Interest Statement each year to help with the tax process. Below is a list of various tax deductions that may be available to you.
While tax code changes each year, typically you cannot deduct:
- Closing costs – Home mortgage interest and specific real estate taxes for the previous year may be deducted if you itemize your taxes. Be sure to hold on to your closing documents for tax time.
- Annual mortgage interest deduction – Typically, you can claim interest paid on up to a $750,000 first mortgage.
- Private mortgage insurance (PMI) – If you put down less than a 20% down payment, you may be paying PMI. If you meet income qualifications, you can claim this deduction.
- State and local taxes (SALT) – These taxes may be claimed up to $10,000.
- Other tax benefits exist for qualifying energy-efficiency improvements and home offices.
While tax code changes each year, typically you cannot deduct:
- Homeowners insurance
- Dues to a homeowner’s association
- Appraisal fees
- Repairs and improvements, except those required for medical care or accessibility, and certain energy-savers
- https://www.irs.gov/pub/irs-pdf/p936.pdf
- The consumer should always consult a tax advisor for information regarding the deductibility of interest and other charges in their particular situation.