Real Estate Taxes And Mortgage Interest Payments Are Both
When you own a home, there are expenses that come along with that ownership. Two of the most significant expenses are real estate taxes and mortgage interest payments. Both of these expenses are essential to understand when considering the cost of homeownership.
Real Estate Taxes
Real estate taxes are taxes that are assessed on the value of your property. The amount of tax you pay is determined by the assessed value of your property and the tax rate in your area. Your real estate taxes are typically paid through an escrow account with your mortgage lender.
Real estate taxes can be a significant expense for homeowners, especially in areas with high property values. It's important to budget for these expenses and make sure you understand how they affect your monthly mortgage payment.
Mortgage Interest Payments
Mortgage interest payments are the interest charges you pay on your mortgage loan. The amount of interest you pay is determined by the interest rate on your loan and the amount of principal you owe. Your interest payments are included in your monthly mortgage payment.
Mortgage interest payments can also be a significant expense for homeowners, especially in the early years of your mortgage when most of your payment goes towards interest. It's important to shop around for the best interest rate when you're getting a mortgage and to understand how your interest payments will affect your overall cost of homeownership.
How Real Estate Taxes and Mortgage Interest Payments Affect Your Taxes
Both real estate taxes and mortgage interest payments can affect your taxes. Real estate taxes are deductible on your federal income tax return, which means you can reduce your taxable income by the amount of taxes you paid. Mortgage interest payments are also deductible on your federal income tax return, which means you can reduce your taxable income by the amount of interest you paid.
It's important to keep track of your real estate taxes and mortgage interest payments so that you can take advantage of these deductions on your tax return.
Conclusion
Real estate taxes and mortgage interest payments are both important expenses to consider when you own a home. Understanding these expenses and how they affect your overall cost of homeownership is essential to making informed financial decisions. Make sure you budget for these expenses and keep track of them for tax purposes.