VA home loans bring a wide array of benefits. From no down payment, to lower interest rates, to no mortgage insurance, VA home loans can help Veterans and Service Members achieve their goal of home ownership. Let’s take a closer look at three tax benefits of VA home loans.
Tax Benefits of VA Home Loans
One of the largest tax benefits of VA home loans is that the mortgage interest you accrue by simply making payments each month is deductible. Tax payers can deduct the interest paid on first and second mortgage up to $1,000,000 in mortgage debt ($500,000 if married and filing separately). For example, on a $250,000 VA home loan, you can expect to see a deduction near the $10,000 range. This of course depends on the interest rate of your loan. Simply deducting mortgage interest can result in a nice tax return around tax season.
Another one of the largest tax benefits of VA home loans is that property taxes qualify as itemized deductions. For example, if you paid a total of $1500 in property taxes and lived in your home for 6 months, you can deduct $750 from your tax obligations for the year. To calculate how much to deduct on your return, add up your property taxes and multiple that number by the number of days you owned the property and then divide by 365.
VA Funding Fee
The VA funding fee is a governmental fee applied to every VA purchase and refinance loan. It’s also tax deductible in most cases. The fee is typically around 2.15% of your home’s purchase price and is considered deductible as long as the tax payer’s annual income is less that $109,000 ($54,000 if married and filing separately). For example, the tax savings on a $250,000 VA loan would be about $5,375.
Property Tax Exemptions
Some disabled Veterans may receive a property tax exemption depending on where they live. Check with your local Veterans Affairs office to see the exact policies and disability rating you qualify for.
VA home loans come with a number of great benefits, tax benefits being one of the largest. Utilizing these itemized deductions can significantly lower your tax obligations and increase your tax return. It’s best to contact your tax professional to see your exact list of eligible deductions.
You may also like: Reasons to Attend a Guild Mortgage Tacoma First Time Home Buying Class