Tax Advice Middle Class Tax Shelters Everyone Can Use Many Dont

Tax Advice: Middle Class Tax Shelters Everyone Can Use,​ Many Don’t
Many people lose money for years to​ landlords because they mistakenly believe they cannot afford to​ buy a​ home .​
However,​ in​ most cases,​ these renters are where they are only because they are unaware of​ all their other options .​
Most people know that it's better to​ put your money into a​ house that you​ own than into a​ rent check you​ never see again .​
Some are aware that mortgage payments could actually be fairly close to​ what they currently pay in​ rent.

What few people realize are the​ tax benefits stemming from owning a​ home can actually save them hundreds of​ dollars each month .​
After taking into account these additional savings,​ which would you​ choose: giving up a​ large chunk of​ your paycheck each month to​ a​ landlord for a​ small apartment,​ or,​ for significantly less money,​ having not just your own home,​ but also the​ freedom to​ take your money out again in​ the​ future?

How Tax Benefits Work

Tax benefits from home ownership come in​ the​ form of​ deductions .​
Come tax time,​ the​ amount of​ money you​ spent on​ tax-deductible expenses related to​ your home financing (many of​ which are outlined below) is​ subtracted from the​ total amount of​ taxes you​ owe .​
Depending on​ how much you​ owe and how much you​ put into your home over the​ course of​ a​ year,​ home financing could actually result in​ zero tax liability .​
That means that your new home may actually bring you​ a​ refund check!

For example,​ assume you​ owe $12,​000 in​ taxes for the​ past year,​ and your mortgage payment is​ $1,​000 per month .​
In the​ early years of​ a​ mortgage,​ payments are usually almost entirely for the​ interest you​ owe on​ your home loan .​
Mortgage interest payments are tax-deductible,​ so from this one deduction alone,​ you​ now owe $12,​000 less in​ taxes—which brings the​ total amount you​ owe the​ government to​ zero .​
If your employer withholds taxes from your paycheck,​ you​ will receive a​ refund check for the​ tax you​ overpaid.

Tax Benefits for All Mortgages

- If you​ own property,​ then you​ pay property taxes .​
These are always fully tax-deductible.

- Points on​ a​ home mortgage are fully deductible.

Tax Benefits for New Mortgages

- as​ mentioned earlier,​ the​ payments you​ make in​ the​ early years of​ a​ home financing loan generally go straight to​ interest .​
The principal,​ or​ actual amount of​ the​ original loan does not start to​ go down until later in​ the​ loan period .​
This means that early on,​ you​ can deduct most,​ if​ not all,​ of​ an​ entire year of​ mortgage payments.

- Both late and early payment fees charged by your lender are considered interest and can be deducted.

- Many tax benefits available in​ the​ first year of​ your mortgage are not available later on​ .​
It is​ always a​ good idea to​ go over your situation with an​ accountant to​ be sure you​ do not miss any opportunities for savings .​
These first-year tax benefits include moving expenses and capital gains.

Tax Benefits for Refinancing a​ Current Mortgage

- If you​ are refinancing in​ order to​ make improvements to​ your property,​ then the​ interest is​ deductible .​
Anything that could reasonably improve your property value—from fixing the​ driveway to​ adding on​ an​ entire new story—counts.

- Interest on​ refinanced mortgages that are taken out for expenses not related to​ home improvement can also be taken as​ a​ deduction,​ but only within certain guidelines .​
Currently,​ the​ maximum deduction for the​ life of​ the​ loan is​ $100,​000 .​
(Married couples filing separately each have a​ maximum of​ $50,​000.)

- Points on​ a​ refinanced home mortgage are still tax-deductible in​ most cases.

Benefits Beyond Tax Savings

No one would complain over having a​ few extra dollars in​ their pocket .​
Not only can financing your home save money on​ your next tax return,​ but it​ can also save money on​ purchases made using money received from refinancing a​ mortgage (or simply money not lost to​ rent) .​
In fact,​ paying off credit cards after financing can be one of​ the​ smartest financial moves you​ can ever make—especially if​ you​ keep those cards paid off.

Consider that even the​ worst mortgage interest rates can be at​ least ten or​ twenty percentage points lower than those for the​ average credit card .​
People with poor credit are often better off with a​ higher mortgage interest rate if​ it​ means their other debt can be reduced,​ thereby bringing their credit score up .​
After re-establishing their credit,​ they can then refinance their home at​ a​ better interest rate.
Tax Advice Middle Class Tax Shelters Everyone Can Use Many Dont Tax Advice Middle Class Tax Shelters Everyone Can Use Many Dont Reviewed by Henda Yesti on June 28, 2018 Rating: 5

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