Tax deductions from mortgage interest
Every year millions of Americans buy a home for different reasons. Home ownership creates a sense of accomplishment and pride. The IRS also offers another benefit of buying a house. Home owners can deduct the interest paid and points paid on the home mortgage each year from their income, in return reducing their tax bill at the end of the year.
Every payment you make on your home mortgage reduces the amount of interest you pay and increases the amount of principal you pay. So each year the deduction gets a little smaller but it’s still WELL worth the deduction. According to the IRS all interest you pay toward your home is tax deductible up to 1 million dollars.
You also get to deduct any points you pay toward closing of a home loan. Sometimes home buyers pay a fee at closing called points. This is basically paying a percentage of the home loan up front in order to get a lower interest rate. These fees are fully tax deductable when you file your taxes. You may also include points paid toward a refinance and home equity loans.
If you are thinking about buying a home now is a great time to invest. Interest rates are very low and the values of homes have greatly decreased. You will also enjoy a great tax break from the government over the life of your loan.