Itemizing, deductions, credits, oh my! While an annoyance for many filers, Tax Day is often less stressful for North Carolina homeowners who are enjoying tax breaks, credits and more. Many home ownership hopefuls might not know about these financial benefits of home ownership. Read on to learn more about how owning a home can help with your taxes in 2021 so you can make the right financial decision for you.
Homeowners Can Deduct Certain Costs if they Itemize
If it makes sense for you to itemize your deductions as opposed to taking the standard deduction, there are many things homeowners can deduct that can help you make the most of your money in 2021.
Mortgage Interest Deduction
When you first buy a home, you may be dismayed to see how much of your monthly mortgage payment goes to mortgage interest, compared to how little goes toward the principal amount. The good news is that mortgage interest is eligible to be deducted from your taxable income.
Property Tax Deductions
Homeowners are able to deduct their state and local property taxes from their federal taxable income in most cases. Since you are able to deduct these taxes each year, not just for the life of their mortgage loan, you’ll be able to enjoy this deduction for decades to come.
Closing Cost Deductions
New home buyers may qualify for a tax deduction for the year of the home purchase for some of the closing costs required to purchase the home. During the first year of home ownership, buyers can claim the origination fees or points on the loan, regardless of whether the buyer or the seller pays them. This can mean considerable tax savings for the first year after a home purchase.
Some Buyers Might be Eligible for the Mortgage Credit Certificate
If you are buying a home in the near future, ask your lender if you qualify for a Mortgage Credit Certificate with your home purchase. Offered as the NC Home Advantage Tax Credit through the NC Housing Finance Agency in North Carolina, a Mortgage Credit Certificate can save you up to $2,000 on your federal taxes annually for the life of your mortgage. For most buyers, this means saving money for their entire 30-year mortgage, putting more money in their pockets for household or other expenses.
Don’t Forget—Owning a Home Helps Build Your Wealth
When you rent your home, you are paying your rent right into your landlord’s pocket. However, when you own your home, you are building equity with every mortgage payment. That means that when you pay back your mortgage, you can think of your home as a giant savings account that builds value over time. What’s better, homes typically increase in value over time, helping to ensure that your nest egg is safe and growing. Many homeowners choose to leverage their real estate investment and the tax breaks that come with it to help them renovate their homes as their needs change, and build their wealth to contribute toward a stable retirement. Learn more about how home ownership can help you build long term generational wealth.
Owning a home is a great way to keep more money in your pocket, build your wealth and even lower your tax bill or maximize a refund. The NC Housing Finance Agency offers many ways to help make home ownership happen for North Carolinians. Learn more at NCHomeAdvantage.com.
