Tax Breaks from Buying a House
If there’s one thing that drives people to buy homes more than the simple freedom of homeownership, it’s the tax breaks they can get. There are several of them at the federal level, and there may be even more at the individual state level, too. Visit: http://www.realtytopia.com
If there’s one thing that drives people to buy homes more than the simple freedom of homeownership, it’s the tax breaks they can get. There are several of them at the federal level, and there may be even more at the individual state level, too. Visit: http://www.realtytopia.com
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<strong>Tax</strong> <strong>Breaks</strong> <strong>from</strong> <strong>Buying</strong> a <strong>House</strong><br />
If there’s one thing that drives people to buy homes more than the simple freedom of homeownership, it’s the tax<br />
breaks they can get. There are several of them at the federal level, and there may be even more at the individual state<br />
level, too.<br />
#1 – The Mortgage Credit Certification<br />
This is one of the most helpful deductions out there, and it offers first-time homebuyers an opportunity to get a tax<br />
break on the interest associated with their mortgages. The goal is to help those with lower incomes afford<br />
homeownership more comfortably. This does not reduce your taxable income. Rather, it goes against your tax bill<br />
directly to reduce what you owe to the IRS.<br />
#2 – Mortgage Payment Interest Deduction<br />
This is probably the biggest tax deduction available after buying a home, and it covers all of the interest you have paid<br />
on loans up to $1 million. Borrowers with new mortgages benefit the most since they often pay the most interest. Keep<br />
in mind that you have to file an itemized tax return to take advantage of this deduction, but because it’s often so large,<br />
it’s well worth it to do so.<br />
#3 – <strong>Tax</strong>-Free Withdrawals <strong>from</strong> your IRA<br />
If you have an Individual Retirement Account, or IRA, you can tap into those funds tax-free to help cover the cost of the<br />
down payment. In almost any other situation, tapping into an IRA early can cost you a 10% penalty of whatever you<br />
withdraw. If you haven’t bought a home in two years, you are also eligible for first-time buyer status. It’s a great break<br />
all around, and one you can take advantage of if you need to do so.<br />
#4 – Real Estate <strong>Tax</strong> Deductions<br />
If you itemize your deductions on a Schedule A tax form, you are also eligible to deduct any real estate taxes you’ve paid<br />
on not only your primary, but also your secondary residence. Any real estate taxes you paid within the tax year are<br />
deductible. Keep in mind, also, that you cannot claim deductions for any taxes you paid on someone else’s property.<br />
#5 – Home Improvement Deductions
If you’re like many new homeowners, then chances are good that you made some improvements on your home (or you<br />
will) soon after buying it. There are also some excellent tax deductions you can get for this. If you use a home equity<br />
loan to pay for your improvements, then that loan qualifies for the same deductions as your main mortgage. Just be sure<br />
to keep the receipts for any major improvements you make. You’ll need these in order to file itemized returns.<br />
The tax breaks available for homebuyers are numerous, and the five listed here only scratch the surface. Whether<br />
you’ve just bought a house, you’re a current homeowner, or you’re considering purchasing a home for the very first<br />
time, this information can help you make better financial choices and get the most out of your purchase, both now and<br />
in the future.
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