Conventional wisdom says, “the bigger the home, the bigger the tax,” no? As real estate agents, we often hear this adage from prospective home owners and clients. Throughout Bucks County, there are no shortage of luxury houses for sale—but you don’t have to fret over how much you’ll pay in taxes if you own one. Once you purchase your own home, you’re eligible for a whole slew of tax breaks that elude renters and modern-day nomads. We’ll discuss a few of the claims that you can make and how they’ll save you thousands of taxable dollars in the grand scheme.
The Secret of a Mortgage
Regardless of where you’re purchasing a home, or how much you’re likely to spend, April is the month that you get to tally your reductions. Assuming that you’ve taken out a mortgage like the majority of Americans, it’s inevitable that you’ll be paying interest on it. Since it’s the practice of banks that you pay off your interest before your principal, you’ll spend your first months paying off the interest on your mortgage. Depending on the price of your property, that amount can be in the hundreds of thousands of dollars. By the grace of the federal government, you’re able to deduct up to $1 million dollars in interest (or up to $500,000 if you and your spouse plan to file your taxes separately) from your taxes that year.
The Investment of Owning
Down the road, if you think of selling your home, you’ll qualify for one of the most sizable of tax reductions—the capital gains exclusion. In a seller’s market, you’ll have the opportunity to keep as much as $500,000 in profits (if married; $250,000 if single). Normally, you pay a 15% tax on all of your investments. After profiting to such a degree, you may even be inclined to purchase another home in Bucks County through a team of trusted realtors. Despite the cost of property taxes in your area (be it Bucks County or elsewhere) any property tax you pay is also eligible to be deducted come April. By owning a home, you build your equity each month, increasing your overall wealth. As far as investments go, it’s one of the best in the books.