If you are currently renting and the current housing market has you contemplating buying a home, or if you just want to feel better about the mortgage you have, you have come to the right place. Having a mortgage can be a truly advantageous thing, and there is no better time than now to find and buy the home of your dreams. As a renter, you are just throwing your money away with no expectation of a return; not building equity and probably paying almost as much as you would pay for a home loan without any of the benefits.
As a first time buyer, you can currently count on an $8,000 tax credit the first year that you have your mortgage and your home, if you buy before December 1, 2009. There are so many properties available, too, that it is hard not to find one that will suit your wants and your needs. Best of all, you may even be able to apply that credit to your purchase, toward closing costs and other expenses. And this tax credit, for new buyers, is not the only one you will get from your mortgage. In fact, for as long as you have a home loan, you will receive great deductions on your income taxes each year.
When you are filing your yearly tax return, you can deduct any interest that you have paid on a mortgage up to $1 million in debt. Because the first few years of your loan involve the highest amounts of interest being paid, you will be able to get the greatest deductions during that time period. However, you can continue to deduct for as long as you have the loan. This can translate into big returns; hundreds or even thousands of dollars that will be owed back to you by the IRS.
You can also deduct interest from a home equity loan or home equity line of credit up to $100,000. If you are concerned about borrowing money to pay for repairs, renovations, or other big expenses, borrowing in one of these capacities can be a tax benefit as well. In fact, as long as you don't get in over your head, having deductions that can be taken on your itemized income tax can be a tremendous financial benefit.
At the end of each year, your lender will provide you with the necessary forms to claim the proper amount of deductions on your form 1040, just as you employer provides you with a W-2 and your banks provide you with statements of earnings for the past twelve months. Bring those to your accountant, input the numbers into your tax calculation program of choice, or add them in in the appropriate spots on your form (remember, you'll need to itemize in order to receive these benefits), and start reaping the financial benefits of home ownership!
