Michaela Phillips, Guaranteed Rate, Inc.
There are many advantages to owning a home, including the tax breaks offered. But these tax breaks only benefit you if the right items are claimed. The surest way to do this is with professional help: make an appointment with your accountant before you file.
Your accountant is most efficient when you provide them with as much documentation as possible; detailed records often equal higher returns. One document sometimes overlooked by homeowners is the Closing Disclosure. Forgetting this can end up costing you a lot of money.
What is a Closing Disclosure?
According to the Consumer Financial Protection Bureau, a Closing Disclosure is a form consisting of five pages; it provides details about your mortgage loan. Several items are included, such as your loan terms, your monthly payments, and closing costs. It’s given to people who buy new homes, as well as to those who refinance.
The Closing Disclosure is a recent addition; it’s only applicable to borrowers who secured a loan after October 15, 2015.
By law, a lender must provide this disclosure to you at least three business days before closing. This gives you the time needed to weigh your final loan terms/costs against the loan estimate and ask any questions.
How does this save you money?
The Closing Disclosure saves you money because it’s filled with tax deductions. It lists interest paid at closing to the lender, property taxes paid at closing, and any discount points purchased to buy down the rate.
All of this can be written off, which results in you either getting a higher refund, or (if you don’t pay enough taxes from your paycheck) owing the government less.
How much does owning a home save you?
People buy homes for many reasons. In fact, some buy them solely for the tax benefits. However, there’s no black and white answer to how much homeownership can save you; it depends on many factors.
According to Efile.com, some tax deductions may include:
- home mortgage interest payments
- real estate taxes
- mortgage insurance premium payments
- mortgage points
- refinancing
- accidental loss
- home office(s)
- certain annual assessments
- the purchase of energy efficient appliances
- moving costs (if you’re relocating for a new job)
Keep in mind that not every housing expense is tax deductible. Normal home improvements for wear and tear, homeowner insurance payments, and any money paid that reduces your principal can’t be written off.
How much you save is largely dictated by your initial tax burden, as well. The Tax Act reports that people in the 15 percent tax bracket can save $15 in federal taxes for every $100 they pay in mortgage interest or property taxes. People in the 25 percent bracket can save $25 for every $100. In short, the more taxes you pay, the more benefit there is to buying a house.
Michaela Phillips is the Vice President of Mortgage Lending at Guaranteed Rate, Inc. Contact Michaela at 303.579.5517, e-mail [email protected] or visit michaelaphillips.com. NMLS:312874.
