Buying a home might feel scary, especially if you've never owned one before. But when you rent, you actually pay someone else's mortgage. Wouldn't it be nicer to be paying your own mortgage instead? How do you know when it's the right time to buy a home? Well, if you have a steady job and are able to pay your current bills without any problems, now would be an excellent time to become a homeowner. Can you afford it? When you own a Havasu home, you receive several tax benefits. Oftentimes, this makes homeownership more affordable than renting.
Tax Benefits of Owning a Havasu Home
First of all, one of the tax benefits homeowners enjoy is the mortgage interest deduction. When you buy a home, your initial payments consist primarily of interest. As time goes on, the interest/principal ratio shifts. Currently, Havasu homeowners can deduct the interest they pay on up to a $750,000 loan limit. Also, if you take out a home equity loan and use it to buy, build or improve your property, that interest is deductible as well as long as the total of both loans doesn't exceed $750,000.
Some homeowners find a bigger tax break if they itemize their deductions. That's because the standard deduction used to be much lower. However, another one of the tax benefits homeowners receive is an increased standard deduction. As of 2018, single Havasu homeowners receive $12,000 as a standard deduction, almost double the $6350 from 2017. If you file as head of household on your taxes, you'll now receive an $18,000 standard deduction (up from $9350 in 2017). And married homeowners who file jointly now receive a $24,000 standard deduction (up from $12,700 in 2017). Talk with your tax preparer to see if you should itemize or take the standard deduction before you file. Every situation is different.
Paid property taxes also add to the tax benefits Havasu homeowners receive. The IRS allows a deduction for all property taxes up to $10,000. This only applies to the year that the taxes were paid. If you hold next year's taxes in escrow, they cannot be used towards a deduction for the current year's tax filing.
Home Sale Exclusion
Finally, the home sale exclusion provides a great tax benefit for homeowners. When you eventually sell your Havasu home, the IRS allows you to keep the profits you receive up on a sale to $250,000 ($500,000 for married couples) without having to pay any capital gains taxes. For example, let's say you bought your home a few years ago for $100,000. Currently, you owe $65,000. You sell it for $300,000. The $235,000 in profit ($300,000 sale minus the $65,000 loan balance) is yours free and clear. If you end up making more off your sale than the home sale exclusion allows, you only pay taxes on the amount above and beyond the exclusion limit.
As you can see, homeownership offers many tax benefits. Because of these tax breaks, homeownership may be more affordable than you might think. Contact a Lake Havasu real estate agent to learn more today.