What are the tax advantages of owning a home?

Are you looking for ways to cut your income taxes?  Do what 34.6 million taxpayers already do to cut their taxes. They own a home and deduct the interest they paid on their home mortgages. The mortgage interest deduction cuts their federal income taxes by a total of nearly $77 billion.

mortgage interest deduction for owning a Spring Texas homeWhat are the tax advantages of owning a Spring Texas home?  There are 3 main tax deductions:

1. Mortgage interest – The interest you paid on your home’s mortgage.  Your lender will send you a Form 1098  reflecting the amount of mortgage interest you paid for the year.

If you took advantage of the historically low interest rates and refinanced in 2010, you will receive a Form 1098 for each loan.

2. Property taxes – In Spring Texas, the school, county, and MUD taxes are deductible.  If you escrow your real estate taxes, your lender will send you a Form 1098 reflecting the amount paid.

3. Mortgage insurance – If when you purchased your home you did not have a 20% down payment, you are probably paying for Private Mortgage Insurance (PMI). Mortgage insurance is to protect the lender in the event you default on your loan and he is not able to recover his costs through the sale of the foreclosed property.

If the loan you received on your Spring Texas home was between the tax years of 2007 and 2010 then the mortgage insurance premiums may be deductible.  I say may because if your Adjusted Gross Income for 2010 is more than $100,000 (more than $50,000 if married filing separately) the deduction is limited. If your AGI for 2010 is more than $109,000 (more than $54,500 if married filing separately) the deduction is eliminated and not available to you.

The amount you paid in mortgage insurance will be reflected on the Form 1098 you received from your lender. Mortgage insurance is not your homeowners insurance.

Home Owners Association (HOA) fees are not tax deductible. Based upon the high annual HOA fees of some subdivisions in Spring Texas, a tax deduction is certainly needed.