Are you thinking of buying a new home? There are plenty of perks if you do buy one. Be it decorating your home to suit your taste; you can put in a professional home theater system or perfectly customize the walk-in closet to hold everything you have in just the way you want it. But there are other benefits—financial benefits. As a new homebuyer, you’ll be pleased to know that there is a range of tax deductions you may be able to use to lower your tax bill. But deciding whether to use them all depends on how much money you stand to save. If you’ve never considered itemizing your tax deductions, you’re not alone. That said, if you’re not aware of the additional tax breaks for real estate developers, you may be missing out.
There are a lot of perks that builders and developers should know about and here are some of the important ones:
•When you get your mortgage you have the option to pay a portion of your interest in advance to reduce your monthly mortgage payment. The amount of interest you pay upfront is called ‘points’ because the figure is calculated as a percentage point of your loan.Mortgage interest is tax-deductible, so provided your mortgage points fit certain criteria, this prepaid interest payment is tax-deductible, too.The mortgage is secured by your main home. Your main investment in homes is generally defined as where you live most of the time.
Paying points is common in the area where the loan was made and you didn’t pay more than the going rate for points in that area.
You report income the year you receive it and deduct expenses in the year you pay them known as the cash method of accounting. The points didn’t replace other fees that normally appear separately on a settlement statement, like appraisal fees, title company fees, attorney fees and property investment taxes
The cash you paid at or before closing on your house for costs like a down payment or earnest money to your real estate developers, plus any points the seller paid, were at least equal to the points charged, you can’t have borrowed this money. You used the loan to buy or build your main home. The lender computed your points as a percentage of your mortgage principal or Your settlement statement clearly shows the points charged for the mortgage.With potentially thousands of rupees tax deductions on the table, it’s a good idea to add up your tax breaks. Compare the sum of your itemized deductions to the standard deduction before deciding which option is best for your tax return.
•You can claim all of the unreimbursed expenses for yourself, your spouse, and your dependents. And it’s not just storage and traveling expenses to your new luxury flats in Mumbai, that you can claim. You can also claim household goods, personal effects, and lodging expenses incurred as a result of your move.
•For most people itemizing their tax deductions, this is where you’ll find the biggest tax break for investment in real estate in India. In 2021, if you’re an individual taxpayer or a married couple filing jointly you can deduct the interest paid. This is because of amortization, the process lenders use to ensure the full loan balance is paid off by the end of the loan.This is good to know because if you’re going to claim the mortgage interest tax deduction, you’ll save more if you start claiming it in the beginning of your mortgage.
•Builders in mumbai say that of all the property-related tax deductions, this is the most straightforward. You pay property tax each year, either through a mortgage account or directly to your city, municipality, or county. If your bank is collecting funds earmarked for property taxes in account, you can’t claim these funds as a tax deduction until the property tax bill has actually been paid.
• Are you a self employed business owner who has a room at home that you use exclusively for business? If so, you’ve just found yourself another tax deduction. To be eligible for this deduction, you must show that your property investment is the main location used to conduct your business, and that the space is used exclusively and regularly for business purposes, as builders and developers. This tax deduction is based on the square footage of your home office. The regular method to calculate this deduction involves determining the percentage of your home that’s used for business activities.
Check out THE REAL ESTATE SECTOR IN INDIA: AS WE SEE IT TODAY
The money you pay in property taxes is deductible, too. If you pay your taxes through a lender escrow account, you’ll find your amount in the account. If you pay directly to your municipality, you will have personal records in the form of a check or automatic transfer.
Necessary home improvements can qualify as tax deductions. Of course, the definition of ‘necessary’ is somewhat limited. If you decide to upgrade your fully functioning kitchen in a luxury flats in Mumbai, those improvement costs may not qualify.But, if you have to make permanent improvements to make your home more accessible for medical reasons, that should qualify. A few examples might include installing medical equipment, installing railings or widening doorways for an accessible home.
Property-related tax breaks and credits that could be available to you for residential projects in Mumbai, your next step is to take stock of your complete financial picture and the range of other tax deductions and credits you’re eligible for as a real estate developer in Mumbai. This will help you see whether standard deductions or itemized deductions will save you the most money.
The tax code provides several benefits for people who own their homes. The main benefit is that the owners do not pay taxes on the imputed rental income from their own luxury flats in Mumbai. They do not have to count the rental value of their homes as taxable income, even though that value is just as much a return on investment as are stock dividends or interest on a savings account. It is a form of income that is not taxed.Buying a home is an investment, part of the returns being the opportunity to live in the home rent free. Unlike returns from other investments, the return on investment in real estate in India, what economists call “imputed rent” is excluded from taxable income. In contrast, landlords must count as income the rent they receive, and renters may not deduct the rent they pay. Capital gains tax breaks come into play when you sell your home for a profit. The capital gain is the difference between the value of the home when you bought it and when you sold it.
Builders and developers may deduct both mortgage interest and property tax payments as well as certain other expenses from their federal income tax if they itemize their deductions. In a well-functioning income tax, all income would be taxable and all costs of earning that income would be deductible. Thus, in a well-functioning income tax, there should be deductions for mortgage interest and property taxes. However, our current system does not tax the imputed rental income that homeowners receive, so the justification for giving a deduction for the costs of earning that income is not clear.
If you’re thinking of buying, there are more pros to buying a home than just the tax benefits. Before taking the plunge, get an accurate estimate of your investment in real estate in India.
You can go HERE IS WHY INVESTING IN REAL ESTATE COULD BE YOUR KEY TO FINANCIAL SECURITY