Tax Benefits of Owning a Home in Michigan
Many people dream of owning a home for the sense of stability and financial benefits it brings. Aside from building equity, locking in monthly payments, and helping you build wealth, homeownership also offers several tax benefits. These benefits incentivize homeownership and alleviate some of the costs. Learn the specific tax benefits of owning a home in Michigan and how it compares with renting.
Mortgage Interest Deduction
The ability to deduct mortgage interest is a huge tax advantage for homeowners, especially in the early stages of homeownership, when interest comprises a significant portion of monthly mortgage payments. Michigan allows homeowners to deduct interest on mortgage loans up to $750,000. This amount and other rules surrounding the mortgage interest deduction change each year, so it’s important to consult a tax expert for up-to-date information.
Mortgage Points Deduction
If you paid “points” or “loan origination fees” when you took out your mortgage, you paid interest upfront to receive a lower interest rate over the life of your loan. The IRS allows these points to be deducted as mortgage interest, providing a tax benefit in the year they are paid, under certain conditions.
Property Tax Deductions
Like most states, homeowners in Michigan pay property taxes. However, they can also deduct the property taxes paid on their primary residence from their state income taxes, directly lowering their taxable income. The amount eligible for deduction has specific limitations, which vary from year to year, so stay informed of any changes to know what to expect come tax time.
Principal Residence Exemption
Michigan’s PRE allows homeowners to reduce the taxable value of their primary residence, effectively lowering their annual property tax bill. By applying for this exemption, Michigan residents can declare their property as their principal residence, qualifying them for a reduced taxable value. You’ll need to meet all eligibility requirements and file the PRE claim by the deadline to retain this exemption year after year.
Homestead Property Tax Credit
The Homestead Property Tax Credit supports Michigan’s efforts to make housing more affordable. Tailored for low-income homeowners and renters alike, this credit offsets a portion of your property taxes or rent paid throughout the year.
To qualify for this credit in tax year 2023, your household income must be $67,300 or less, and the taxable value of your homestead must not exceed $154,400. The credit is most beneficial to those with lower incomes, as the credit amount tapers off as income increases. Other rules and exceptions apply, so talk to a tax professional for more information.
Energy-Efficient Home Improvement Tax Credit
Michigan homeowners looking to reduce their carbon footprint and save money on utility bills can benefit from various tax incentives for energy-efficient home upgrades. The federal government encourages residents to invest in energy-saving renovations—such as installing new insulation, energy-efficient windows, and high-efficiency HVAC systems—by offering a tax credit of up to $3,200 on improvements made through 2032. Known as the Energy-Efficient Home Improvement Tax Credit, this initiative qualifies homeowners for tax credits while helping them enhance the comfort and value of their homes.
First-Time Home Buyer Savings Program
In 2022, Michigan launched the First-Time Home Buyer Savings Program, an initiative designed to make homeownership more accessible and affordable for first-time buyers in the state. This program allows individuals to open a dedicated savings account to fund the purchase of their first home. The money can go toward a down payment and closing costs, and contributions to this account are tax deductible. This tax benefit makes it faster and easier to save up for a house, putting your homeownership dreams within reach.
Renting Has Its Perks, Too
While owning a home in Michigan comes with financial incentives, renting has notable benefits as well. If you appreciate flexibility, renting allows you to move without the hassle and cost of selling a home. Renters also enjoy the convenience of leaving maintenance and repair costs to their landlord. In short, renting could be perfect for you if you favor convenience and simplicity over the long-term financial commitments and responsibilities of homeownership.
Find Affordable Rental Properties in Lansing and Jackson, MI
At Westbay Management Company, we recognize that the “perfect home” looks a little different for everyone. That’s why we offer three properties in Lansing and Jackson, MI, with one- and two-bedroom floor plans to choose from. Our high-quality, well-maintained apartments are affordably priced, with pet-friendly policies and a range of amenities to suit your needs. Enjoy covered on-site parking, a clubhouse, private balconies, and full kitchens with energy-efficient appliances. Plus, we cover heat, water, and trash expenses for comfortable and convenient living.
Considering the financial benefits of owning a home vs. renting, consider Westbay Management Company for our affordable apartments in Lansing and Jackson. Call us at 517-323-9400 or contact us online to learn how we can meet your housing needs.