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Save up to $246 with a FirstLight Federal Credit Union RV loan
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Earn up to 14% more with a FirstLight Federal Credit Union IRA
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There are significant tax advantages to homeownership. Mortgage interest and property taxes may be tax deductible.
The following table illustrates the estimated annual deduction for a $150,000 home and a $350,000 home.
Home value $150K $350K
Estimated monthly interest and taxes $850 $2,325
Annual deduction (estimated monthly
interest and taxes multiplied by 12 months) $10,200 $27,900
If your adjusted gross income was $80,000 last year, and you bought the $350,000 home, your adjusted gross income this year will be $52,100:
$80,000 adjusted gross income
-$27,900 mortgage deduction
$52,100 new adjusted gross income
Assuming you are in the 33 percent tax bracket, your tax savings will be approximately 33 percent of your total mortgage deduction:
$27,900 x 33% =
$9,207 annually ($767 monthly)
You can either receive a tax refund at the end of the year, or raise the number of standard exemptions to have fewer taxes withheld (equaling the amount you would have received as a tax refund). The net effect is the same – you are simply choosing to use your year-end tax refund on a monthly basis.
Your mortgage payment will likely be higher than your rent, but owning a home may provide a tax break. On your federal income tax return, if you itemize your deductions, you can usually deduct some home-related costs, the most common ones being mortgage interest (including points) and property taxes. The more you can deduct, the lower your tax liability.
Since your tax situation may be more complicated than in years past because of a recent home purchase, you may want to hire a professional or purchase tax preparation software to do your return. However, it is possible to do it on your own too – it just may require a little bit of research. All of the tax regulations are available on the IRS website.