Tax Benefits of Owning Real Estate

Tax benefits of owning real estate can be huge.

Whether buying as an owner-occupant (your primary home) or buying an investment property... there are tax advantages. Everyone's situation is different, and it's a great idea to consult with a tax advisor especially before buying investment property. Why? Tax structures and deductions, and weighing in your income and other assets you may have could play a large role in HOW you buy, and WHAT you buy, and how you might benefit from that purchase!

But for the average real estate Buyer who is purchasing a home to live in (owner-occupant), it's all pretty straight forward.

See the below article from the National Association of Realtors.

The Tax Benefits of Owning

The tax deductions you’re eligible to take for mortgage interest and property taxes greatly increase the financial benefits of home ownership. Let’s work through a hypothetical situation to see how it works.

For a married couple filing jointly earning $112,400 in gross income, here’s how those homeownership deductions might work:112,400 (income)
-12,577 (home ownership deductions)
= 99,823 (taxable income)

Using IRS tax tables from 2014, their tax would be $16,669. Without the deductions, they would pay $19,812.50 in taxes ($112,400 X 25% - 8,287.50, based on the 2014 IRS Computation Worksheet). This means they save $3,143.50 on their taxes as homeowners.

Of course, this is just one example to give you an idea of how homeownership might affect your tax liability. These numbers will vary according to your mortgage, local tax rates, marital status, income, and based upon other deductions for which you may qualify. Consult with your CPA or tax professional to understand your particular situation.

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