Seizing available homeownership tax breaks
Mar 13 2012 2:47PM
With rental prices rising in many areas, a more affordable option for some people may be to purchase some of the available real estate in Los Angeles County. However, many potential buyers may not be aware that they can save additional money through various homeownership tax breaks.
While property taxes will be an additional bill homeowners do see, the amount they pay in property taxes each year is also something that can be deducted from homeowners' income taxes, reducing its actual impact on a household's finances.
One of the biggest tax advantages of homeownership is the available income tax deduction for mortgage interest. For each mortgage payment, a significant amount goes toward interest on the loan, and not the actual principal amount.
Whatever homeowners pay in interest on their home loan, they can deduct that amount, which is generally thousands of dollars per year. Buyers also won't need to calculate this themselves, as the lender should send out a year-end summary for use each tax season.
That interest can really add up during the early years of a loan. For example, on a $200,000 loan with a 7 percent interest rate, the monthly payment is around $1,300. However, in the first year, homeowners will pay more than $13,000 in interest.
