There can be many common tax advantages for owning real estate in Boston MA through use of tax deductions. Deductions lower your taxable earnings and therefore result in fewer taxes. It is important to understand the tax benefits before purchasing or when evaluating renting vs. buying. This article provides an explanation of MA common tax advantages for owning real estate.
Tax Deduction Requirements
Not everybody can take advantage of tax deductions. When preparing your taxes, you can use the standard deduction or itemized deductions, whichever is more favorable. If you own an inexpensive MA home, the deductible expenses may not total more than the standard deduction. Other financial variables may factor in as well. Only an accountant can give you a true evaluation of the tax benefits of buying a MA residence taking into account your personal situation.
Usable Property-Related Costs
Only the interest part of your mortgage payment is tax deductible. In the first few years of having a MA property, you get charged primarily for interest than anything else. Therefore, the total deductible interest is much higher when you first own a property than in subsequent years. Your mortgage company will send you a statement each year detailing the mortgage interest paid on your MA property.
Real Estate Taxes
MA real estate property taxes may also be tax deductible. Real estate taxes are an annual amount but are generally invoiced in quarterly time frames. These taxes are sometimes included in your mortgage monthly payment, but file copies of the property tax bills mailed directly to you. The amount in mortgage statements may not include the full calendar year.
If you first bought your MA residence within a designated time frame and if you are part of a certain income range, you may be able to deduct mortgage insurance payments. MI is due on a monthly basis for mortgages more than 80% of the home price and does not disappear until the loan amount drops below the 80% level.
Points and Other Fees
Consider keeping a copy of your closing settlement statement. Some charges such as points, adjusted real estate taxes, and pre-paid interest can be deductible. Give the paperwork to your tax consultant.
An Explanation Of MA Common Tax Advantages For Owning Real Estate
The above is an explanation of MA common tax advantages for owning real estate and refers to primary residences. If you own investment real estate, the potential deductions vary. This information is meant strictly as a basic overview. Always speak with a tax professional for sound guidance adapted to your personal profile or to your type of home.