There may be different real estate ownership tax advantages through use of tax deductions. Deductions reduce your taxable earnings and therefore lead to lower taxes owed. It is useful to learn the tax benefits before purchasing a property or when comparing renting versus owning. This article includes an explanation of real estate ownership tax advantages in MA.
Tax Deduction Criteria
Not everybody can claim real estate ownership tax advantages in MA. When preparing taxes, you can apply the standard deduction or itemized deductions, whichever results in lower taxes. If you own a low priced home, the deductible expenses may not add up to more than the standard deduction. Other financial variables could impact these figures as well. A tax consultant can provide a better understanding of the tax advantages of owning a property by reviewing your personal situation.
Deductible Home Expenses
Only the interest part of your loan payments are tax deductible. In the first few years of owning a property, you spend more on interest than anything else. Therefore, the total deductible interest is much higher in those first few years. Your mortgage company will mail you a statement every year summarizing the total interest paid.
Real estate property taxes are also be tax deductible. Property taxes are an annual calculation but are commonly due in quarterly increments. These taxes are sometimes part of your mortgage payments, but retain records of the tax statements sent to you. The amount in mortgage statements may not reflect the total amount, particularly if you closed on the home mid-year.
If you first bought your home within a special period of time and if you are under a certain income range, you can possibly deduct MI payments. MI is invoiced at closing and on a recurring basis for mortgages more than 80 percent of the purchase price and does not get removed until the balance decreases to the 78 percent level.
Items Paid at Closing
Be sure to retain the original of your closing paperwork. A variety of charges such as points, adjusted real estate taxes, and pre-paid interest may be deductible. Provide the documentation to your accountant.
Real Estate Ownership Tax Advantages In MA
The above real estate ownership tax advantages in MA is applicable to primary residences. If you bought investment property, the possible deductions vary. This information is meant strictly as a general introduction. Always consult with a tax advisor for solid guidance specific to your personal situation or to your type of home.