Be aware of these new deductions and credits
Buying your first home is a life event that comes with a whole fortune of tax deduction possibilities. These are tried-and-true deductions that add up to good savings. When you are filing taxes a home owner you can deduct the surveil :[deals-hub-ad]
- Mortgage interest. Yes, the interest on your monthly payment is deductible. In 2017 and prior, you could deduct interest on mortgage debt up to $1 million, but as of 2018 filings, that figure has been reduced to $750,000.
- Mortgage points. If you brought your mortgage interest rate down by a point or two, you can deduct that cost from your first tax filing after your purchase.
- Property taxes. You can deduct your full real estate taxes on your annual taxes.
- Mortgage insurance payments. If your down payment was less than 20%, you’re probably paying mortgage insurance every month. Nobody likes paying it, but at least it’s deductible!
- Home office space. If you work from home, you can deduct the square footage where you conduct business on your taxes.
- Credit for certain home repairs. If you upgrade your home to become more energy efficient, you may be able to deduct some of the costs so hang onto those receipts.
- Waived IRA fees. While it’s not exactly a credit, if you dip into your IRA to make a home down payment, the IRS will waive the 10% penalty for removing money early. You can take up to $10,000.
- Various itemization benefits. Before you bought a home, you may have taken the standard deduction. With enough reason to itemize, you’re eligible for all sorts of deductions, such as charitable donations.
[ deals-hub-ad ] MYMOVE recommends consulting an account professional before claiming any tax deductions.
Avoid surprises by planning now
Do yourself a favor by planning your taxes ahead. If you ’ re not mindful of which documents you ’ ll need, it ’ second better to consult a CPA a soon as you can. hera are a few tips on preparing early :
- Make a checklist of mortgage-related payments. Make a list and check it twice – your mortgage lender will send you necessary tax documents, but know what you’re looking for in the mail and hang onto them.
- Keep receipts for home improvements or donations. When in doubt, save all receipts related to everything from charitable donations to home office purchases that could be deducted.
- File early in case your accountant needs more information from you.
The Bottom Line
Buying a house is fun, and believe it or not – filing your taxes can be besides with the correct readiness and know-how. plan ahead and take advantage of those tax benefits of buying a home, and you might be able to afford that fresh big shield television after all .
Frequently Asked Questions
How does owning a home affect your taxes?
Owning a home will make your taxes more complicate, as you ’ ll have more deductions to itemize, but it comes with major tax benefits and will likely mean saving money in the end .
What do first-time homeowners need in order to file taxes?
When filing your taxes as a new homeowner, be sure to have tax documents related to your mortgage payments, mortgage policy payments, place taxes, receipts of home repairs, and receipts of expenses related to a home office if you work from home plate.
Is there a new homeowner tax credit for 2020?
The federal first-time homeowner tax credit is no longer available, but many state housing authorities offer first-time family buyer tax credits and aid programs .
Claire Voelker contributed to this report
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