Owning a home provides our clients with multiple opportunities for tax savings and financial benefits. As associates of First Horizon Bank, it’s important to be aware of these strategies so we can guide clients toward maximizing their investment.
1. Mortgage Interest Deduction
One of the most significant tax benefits for homeowners is the ability to deduct mortgage interest paid on a qualified loan. For many clients, this deduction can substantially lower taxable income, especially in the early years of the mortgage when interest payments are highest. Eligible interest from loans up to $750,000 for purchases since 2018 (or $1 million for older loans) may be deductible, allowing clients to reduce their federal income tax burden.
Tip for associates: Remind clients to keep track of their annual mortgage interest statements (Form 1098) for accurate tax filing.(1)
2. Mortgage Points Deduction
Clients may pay mortgage “points” upfront to reduce their interest rates. These points may be tax-deductible in the year the home is purchased if certain requirements are met. This allows clients to lower their taxable income and increase available cash for other uses.
Tip for associates: Encourage clients to consult their tax advisor about deducting points paid at closing.(2)
3. Homestead Exemption
By filing for a homestead exemption with local authorities, clients can reduce the taxable value of their home. This results in lower property taxes and, in some states, additional protections. Applying for this exemption is essential for maximizing savings.
Tip for associates: Prompt clients to file for the exemption shortly after closing and check renewal requirements. (3)
4. Annual Insurance Shopping
Insurance premiums can fluctuate, so clients should shop for homeowners insurance each year to ensure they are getting the best rate and coverage. Saving on insurance makes homeownership more affordable and frees up funds for other financial goals.
Tip for associates: Advise clients to review insurance options annually for potential savings.
Associates at First Horizon Bank play a key role in helping clients realize the full tax benefits of homeownership. By discussing mortgage interest write-offs, points deductions, the homestead exemption, and insurance shopping, we empower clients to make smart financial decisions that reduce expenses and enhance their investment.
1. IRS – Deducting Mortgage Interest
2. IRS – Deducting Mortgage Points
3. Investopedia – Homestead Exemption
4. Consumer Reports – Home Insurance Shopping
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