Tax advantages of homeownership. There are significant tax benefits associated with buying a house, both at the time of purchase and for the duration of time you own the home - but always check with your tax advisor to make sure you are in compliance and allowed any and all legal tax benefits. • Homestead exemption. Many states, including Illinois, exempt owner-occupied homes (homesteads) from a portion of the property tax amount that would normally accrue. For instance, Louisiana exempts the first $75,000 of a home’s value from property tax assessments, so a $200,000 home in New Orleans is taxed as if it were worth $125,000. In Illinois, each county determines its homestead exemption calculation. For instance, in Lake County, the assessor gives a $6,000 deduction off the "assessed valuation" of the home. The tax rate percentage for a home you might be looking at would then be multiplied by the $6,000 exemption amount to determine how much your taxes would be reduced for being an owner-occupant of the home. • Federal tax deductions. When you’re looking to purchase a home, it’s important to understand what can be deducted on your tax return and what can’t. Property taxes and interest paid on your mortgage can be deducted if you itemize your federal income taxes, which can reduce your income tax burden. Many home buyers, unfortunately, overlook the effect of mortgage interest on their federal income tax payments. Mortgage interest can be a powerful financial planning tool. Calculate the amount of mortgage interest deductions you are eligible for and include that in your annual financial planning. Then, make a point of checking Internal Revenue Service
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