Buying a home or other property in the United States is easy and there is also no ban on foreign investment in property. But still, U.S. real estate markets can be complicated, and each state has its own regulations for property transfer.
Tax implications are an important consideration and we take a look to see if there are tax benefits with homeownership.
Mortgages
A massive percentage, almost 63%, of homes in the United States are mortgaged. Mortgages require plenty of documentation but the good news is that the interest paid on loan is tax-deductible.
The property can be anything, even a mobile home or a houseboat, so long as it is collateral for the loan. The provider of your mortgage will provide you with an annual statement for tax purposes.
How to claim the mortgage interest deduction requires your bank to send you details of how much you paid in mortgage interest and points during the tax year. The bank will also send a copy of the form to the IRS.
The IRS will check this against what you fill in on your tax forms. It is always important to keep good records of everything and remember that you may well be able to deduct mortgage interest if you use part of your house as a home office.
A home in a limited liability company
The cost of homeownership has increased and many people are turning to tax relief companies. They want help with reducing their bills by structuring the purchase in certain ways that limit tax liability.
Before you invest in any property with the idea of benefiting from any costs, consult with a tax resolution office such as Fortress Tax Relief to get their expertise first-hand. Property tax is always applied regardless of who- or how property is owned.
Holding a home in a limited liability company is a regular move for homeowners, but particularly for those who own several homes. The reason is that you get the most asset protection.
Homeowners have flexibility in making long-term plans with regards to income and transfer taxes. Once the LLC has been established, there are a number of ways to transfer the property.
Deductions
Most tax benefits that you get from owning a house come in the form of deductions. If you own a home and your mortgage isn’t more than $750,000, you can deduct the interest you pay on the loan. It used to be $1 million, but the Tax Cuts & Jobs Act brought this limit down.
With Private Mortgage Insurance or PMI as it is referred to, if you took out a mortgage after 2007, you may well be able to deduct private mortgage insurance payments.
Lenders charge private mortgage insurance to those borrowers who put down less than 20%. If you’re single earning less than $50 000, you are eligible for the deduction and if you are married, the threshold is $100 000.
Lowering your property tax bill
It is believed that a big percentage of properties in the United States are over-assessed. This means that homeowners may well be paying too much in taxes. Homeowners who believe this could be their case can appeal their home’s assessed value.
They can also possibly lower their tax bill by looking at programs that offer tax deductions and exemptions for seniors, veterans, those who own agricultural land and also people with disabilities.
Quite a few states also offer homestead tax breaks. This is where part of the home’s value is exempt from property taxes. It also pays to check with your local tax office to find out if there are exemptions and tax deductions in your particular area.
