Buying a home can be expensive. You have to make your mortgage payments. On top of that, you'll need to pay annual taxes. There are ways to offset the high cost of owning a home through tax deductions and other state incentives.
Homeowners Usually Pay Property Taxes
Your local government collects annual taxes from property owners. The amount you'll pay depends on where you live, since the tax rates vary significantly across the country and even within the same state. The federal government encourages home ownership by allowing you to deduct your property taxes from your federal income tax.
The Assessed Value of Your Home Affects Property Taxes
Most local governments base your property tax on the assessed value of your home. This value is multiplied by a fixed percentage, called the mill rate, and then multiplied by 1,000 to get your tax amount.
Each local government uses its own method to arrive at the assessed value of your home. Usually, it is a percentage of your home's real appraised value.In some places, it is the same. If you object to the amount of your property tax, you can appeal to your local government.
Check for Energy Rebates in Your State
One way to offset the cost of your home is to take advantage of energy rebates offered by state or local governments. Energy rebates can cover a wide range of incentives, but they all reward you for reducing the amount of energy your home consumes.
They are usually calculated as a percentage or fixed amount of your cost in making your home more energy efficient. For example, you may install solar panels on your roof to reduce the amount of electricity you use. In some areas, you'll receive an energy rebate for a portion of the price you paid for the solar panels.
You Can Deduct Sales Tax on Home Improvements
Many local governments charge a sales tax when you purchase goods, but usually exempt real estate. However, you may end up paying a lot in sales tax if you make substantial purchases as part of a home improvement project. These might include new appliances, plasterboard, paint, and any other supplies or materials you need. The federal government allows a deduction for these sales tax payments.
A Tax Lawyer Can Help
The law surrounding taxes on your home can be complicated. Plus, the facts of each case are unique. This article provides a brief, general introduction to the topic. For more detailed, specific information, please contact a tax lawyer with real estate experience.