Top 4 Tax Benefits for New Homeowners to Maximize Savings

Owning your dream home is a significant milestone, but it also involves financial responsibilities like loans and mortgage payments. Fortunately, new homeowners can benefit from several tax advantages that help reduce overall tax bills. These deductions aren’t automatic; you need to claim them during tax filing to enjoy the savings. Effectively utilizing these benefits can lessen your tax liability and free up funds that can be redirected toward your mortgage repayment.

• Property Tax Deduction
• Mortgage Insurance Deduction
• Points on Your Loan
• Mortgage Interest Deduction

Property Taxes

Property taxes paid on your home are often collected in advance by your lender during loan settlement. If your lender manages your property tax payments as part of your loan, these amounts are deductible on your taxes, saving you money each year.

Mortgage Insurance Premiums

When your down payment is less than 20%, you are required to pay private mortgage insurance (PMI). Though it’s paid to protect the lender, the premiums can be deducted from your taxes.

Loan Points

Some lenders offer the option to buy points, paying about 1% of your loan amount for a reduced interest rate. The cost paid for these points can be deducted on your tax return, lowering your overall expenses.

Interest on Your Mortgage

The interest paid on your mortgage is a significant tax deduction, especially in the early years when payments largely go toward interest. Over time, as your loan matures, you can claim these interest payments to reduce your taxable income.