Yes, buying and owning a home has tax benefits.
- The interest you pay on your mortgage is deductible (in most cases). If you own a home and don’t have a mortgage greater than $750,000, you can deduct the interest you pay on the loan. This is one of the biggest benefits to owning a home versus renting.
- The amount you pay in property taxes is deductible. Under the new law, you can deduct up to $10,000. The deduction for state and local income taxes was combined with the deduction for state and local property taxes.
- You can get a tax deduction for points (over the life of your loan). If you paid points to your lender when you got your mortgage or refinanced an existing one, you can take advantage of a tax deduction. The only caveat is that you have to have actually given money to the lender for these points.
- Private Mortgage Insurance (PMI) can be deducted in some cases. Private Mortgage Insurance (or PMI) is a fee you pay when you put less than 20% down on your home. Lenders do this to protect themselves from losses in the event you default on your loan.
Since all of these deductions are considered Itemized Deductions, in order to take advantage of these deductions, the total of these would need to be higher than your standard deduction. Since you purchased your home in December 2020, you may not have more in these deductions than the standard deduction.