As a first time homeowner there are many things that you will learn about both the process itself and your actual financial impact. From maintenance around the house to near and long-term tax benefits, below are RYP Property Solutions, Inc’s list of financial perks for first time homeowners.
One of the biggest and most beneficial deductions is deducting the interest that you pay on your mortgage. In order for your home to qualify your loan must be below one million dollars and must be insured. When filing your taxes, if married you can file it alone or jointly. At the end of the year, you will be given a 1098 which keeps track of how much interest you have paid.
When buying or building your home you can pay interest upfront which in return gives you points. The year you purchase this home you can deduct these points from your taxes. Keep in mind though that in order to get points it must be your main home and must be in range of where you live. There are also other regulations to receive these points so make sure you do a little research before paying the extra interest.
PMI Deductions in 2015
If you can’t afford to make a large down payment on a home many lenders will require you to purchase private mortgage insurance on the loan in case you default on the loan. For this year, you will be able to deduct this payment from your taxes if you do an itemized tax deduction.
Real Estate Tax Deductions
Every homeowner has to pay a real estate tax; whether to the state or local government, this tax can be deducted. If your real estate tax is combined with your mortgage, check the 1098 form to find out how much you have paid over the year. If you pay your taxes directly make sure you keep track of how much you have paid. Remember: if you paid the owners back taxes at the closing you can claim it on your taxes. This number can be found on your settlement.
Addition of Other Tax Deductions
Now that you own a home you will want to consider doing itemized taxes. This means you will need to switch from a 1040-EZ to a 1040 form. By owning your home you generally have more deductions than the standard deductions which are $6,300 for an individual and $12,600 for a married couple.
Even though you have just purchased the home you have also most likely thought about the resale value. The good news is the current law protects your gains from taxes for $250,000 for individuals and $500,000 for married couples as long as you have lived in the home for two out of the last five years.
As a first time homeowner it is important that you understand how your home can benefit you. Doing your homework can help save you money on both your immediate and future taxes. If you do not feel comfortable handling this information on your own, be sure to work with a good accountant to ensure getting the most out of your homeownership perks!