Home-ownership comes with many perks. One advantage is a little bit of tax relief. You would be spending this money whether or not you owned a home because all expenses are built into the price of rent, however, a homeowner can deduct them!
Mortgage Interest Deductions: During the first years of a mortgage, most of the payment is going towards interest and only a small amount goes towards principal. For homeowners, all the interest is tax deductible. On a $100,000 30yr-loan at 4.25%, $4,200 goes towards interest in the first year. All $4,200 is deductible. This is the same for home-improvement loan interest!
Property Taxes: Property taxes are another expense homeowners have that are tax deductible.
Energy Efficiency Tax Credit: This is due to expire at the end of this year. But if you have made your home more energy efficient, you can get a tax credit of $500!
PMI: If you don’t have at least 20% paid down on your house you will be paying Private Mortgage Insurance. This is also deductible but only if you make less than $109,000 a year.
Depreciation: If you are renting out a house you can deduct the depreciation value of the house. The recovery period for a rental house is 27.5 years. To calculate what you could deduct use this calculator. Make sure to set the recovery period to 27.5 years.
This information is for awareness only. I am not a tax adviser. All information given here has been abbreviated from Marketwatch.com. Consult a tax expert to fully take advantage of all home-ownership tax breaks.