Uncategorized October 12, 2022

Tax Considerations of a Home Purchase

Since 2017, purchasing  a home will entitle you to deduct mortgage interest for up to $750,000 in debt for a couple and $375,000 if filing separately or as a single taxpayer.  A larger mortgage will require a proration  ( if you borrow $1,000,000, $250,000 are not deductible).
Also, State and Local Taxes are capped at $10,000.
If you decide to itemize you will be subject to the Mortgage and State and Local Tax deduction limits but you can also choose the alternative which is the Standard deduction.
The Standard deduction for all categories of taxpayers  is shown below:
Taxpayer status                                                    Standard   Deduction
Married                                                                        $25,900
Per Spouse  over 65                                                   $ 1,400   (added to the $25,900)
Single                                                                            $12,950
Single over 65                                                             $14,700
Head of Household                                                    $19,400
Head of Household Over 65                                     $21,150
Detailed tax analysis is called for to determine the tax advantage of home ownership if purchased today.  The Tax Foundation estimates that 13.7% of all filers chose to itemize last year vs 31.1% before the tax law came into effect which reduced the amount of allowed deductions.
Lower income families have greater utility for the Standard deduction. 
Sculpture: “Salmon Vendor” (Vendeuse de saumons) in Steatite from Quebec artist Joseline Laramee. To contact the artist, joselinelaramee@gmail.com.