Archive for January, 2008

Colorado Homeowners Benefit at Tax Time

Jan 8th 2008livemileHousing & Finance

The holidays have passed, and a new year has begun – which means that tax time is right around the corner.  If you are a Colorado homeowner, this is also the time of year when owning your own home really pays off.

 

There are a number of tax advantages and tax breaks for homeowners.  For example, if you own your own home you can:

 

  1. Deduct the interest you pay on the mortgage for your primary place of residence.  This means a sizeable tax deduction, particularly in the early years of your mortgage, when your payments are applied primarily to the interest, rather than the principle (the amount you borrowed to buy your home).  The amount of interest you pay throughout the year is used to lower your taxable income on that year’s returns, in turn lowering the amount you pay in taxes.  For example, during the first few years of a $200,000 home loan, you might be able to lower your taxable income by as much as $14,000.

 

  1. Deduct the interest you pay on the mortgage for your second home.  The home loan interest deduction doesn’t apply to just your primary place of residence: You can also deduct the interest paid on a second home, or a vacation home.  In places like Colorado, where many mountain towns and popular ski resorts boast thriving second home markets, this deduction is a big deal for homeowners.

 

  1. Deduct the real estate taxes you pay on your home(s).  Every year, homeowners are required to pay property taxes on their homes.  Just like the interest paid on your loan, these taxes can be deducted on your tax return every year, lowering your taxable income.

 

Taking these deductions will require you to itemize, which will make your tax returns a little more complicated.  However, as a homeowner your itemized deductions will most likely end up being far more than the standard deduction, making it well worth your while to do so.  For a couple of sample scenarios, please see this article on AllLaw.com: The Tax Benefits of Home Owenrship.

 

If you are like most people, you probably see doing your taxes as an unfortunate chore, at best.  Owning a home turns tax time into a more satisfying experience, because you get to see how much money you’ve actually saved by owning your own home.

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