Jay Kimelman, CPA, CITP
Founder & CIO | the digital CPA
One of the best ways to maximize your tax savings is to purchase a home. Next to the Child Tax Credit, the tax benefit of owning a home and deducting the interest paid on your annual tax return is a great way to maximize deductions and retain the money you earn. If you are a renter, no such tax credit exits and with interest rates at an all time low, many people are able to find a home mortgage for the same amount or less than they currently pay in rent. Ask yourself this, if you are currently renting your home or apartment and do not currently itemize deductions on your annual tax return, are you leaving money on the table? In many cases, buying a home, even if you have to sell it a few years later can be the best way to minimize your tax liability. If you find a qualified realtor to coach you through the process and sell that home for at least what you paid for it, you had free rent the whole time you lived there and probably created some tax savings in your overall budget.
Here is another one of the tax benefits of owning a home. Ever heard about “points” on your loan? Your realtor can walk you through what these are but the first year you buy your home, you can claim the points, or origination fees, on your loan regardless of if they paid by you or the seller! Then there is the property tax! Yes, this is new to home owners but it is also tax deductible.
Once you buy your home, upgrading the energy efficiency of your home can also provide you tax savings as well as savings to your monthly energy bills. The Residential Renewable Energy Tax Credit provides you savings when you install energy saving systems such as geothermal heat pumps, solar water heaters, fuel cell property, and wind turbines. With the exception of the fuel cell property, there is no maximum credit for qualified items! Keep in mind, current tax credits are good until the end of 2016, so contact your tax preparer to make sure you have maximized your opportunities.
Need a little extra cash to pay for these upgrades. A home equity line of credit is a great way to make upgrades or pay off high interest credit cards and create an additional deduction on your income tax return.
Owning a home is the best way to create long-term wealth. It should be part of your long-term financial strategy and offers many more benefits than you may realize. Keeping more of your hard earned money in your pocket each month is a great way to benefit from home ownership and preparing for tax savings is an added bonus!
About Jay Kimelman
Jay prides himself on being “not your typical CPA”. While he performs all the functions of a trained and experienced CPA, he brings to the table some diverse skills including a history as a controller for a health care company, the CFO of a pharmaceutical manufacturer, and the founder and owner of his own manufacturing company.
Through these experiences, Jay understands the struggles of business owners, the importance of cash flow, and the need to make technology work for you! Jay is gifted in understanding and utilizing new and emerging hardware and software to save your business time and money.
To learn more about how Jay and his team at The Digital CPA can help you, please visit their website at www.TheDigitalCPA.com.