There are normally many common tax deductions for buying real estate in Massachusetts through use of tax deductions. Deductions lower your taxable earnings and therefore result in lower taxes. It is important to understand the tax implication before purchasing or when evaluating renting and buying. This article provides an overview of Massachusetts common tax deductions for buying real estate.
Tax Deduction Requirements
Not everybody is eligible for tax deductions. When preparing your taxes, you can opt for the standard deduction or itemized deductions, whichever results in less taxes. If you own a low priced Massachusetts home, the deductible expenses may not add up to higher than the standard deduction. Other personal variables may impact these figures as well. Only a tax consultant can provide a true understanding of the tax advantages of buying a Massachusetts property taking into consideration your personal situation.
Deductible Home Ownership Expenses
Only the interest part of your mortgage payments are tax deductible. In the early stages of having a Massachusetts home, you spend more on interest than principal. Therefore, the total deductible interest is higher when you first own a property than in subsequent years. Your loan provider will mail you a statement each year totaling the mortgage interest paid on your Massachusetts home.
Massachusetts real estate property taxes may also be tax deductible. Real estate taxes are a yearly amount but are traditionally due in quarterly increments. These taxes are sometimes included in your mortgage statements, but hold on to copies of the property tax statements sent directly to you. The total in mortgage statements may not include the full calendar year.
Private Mortgage Insurance
If you first bought your Massachusetts real estate within a certain time frame and if you are within a qualifying income range, you may be able to deduct private mortgage insurance payments. PMI is charged on a monthly basis for loans more than 80% of the market price and does not disappear until the loan balance decreases to the 80% level.
Be sure to keep a the original of your closing settlement statement. Some charges such as points, adjusted real estate taxes, and pre-paid interest can be deductible. Furnish the paperwork to your accountant.
An Overview Of Massachusetts Common Tax Deductions For Buying Real Estate
The above is an overview of Massachusetts common tax deductions for buying real estate and refers to primary residences. If you have investment real estate, the variety deductions vary. This is meant solely as a basic overview. Always ask a tax professional for expert advice adapted to your financial profile or to your type of home.