Have you purchased a new home this year? If so, congratulations! Along with your new pad come the many joys of home maintenance, yard work and everyone’s favorite yearly task-taxes. The good news is that as a new homeowner, you are entitled to many tax deductions. The bad news? Your taxes will be more complicated, as you’ll move to Form 1040 and Schedule A, where you’ll have to detail your tax-deductible expenses. Many homeowners dismiss the hassle of itemizing, but you can save a significant amount. Below are a few common deductions you could possibly receive; check them out and you could save a few dollars!
- Mortgage interest – That loan you took out to pay for your new home? If your loan is under $1 million, the interest you’re paying will be tax deductible. Refinancing or getting a home equity or line of credit can also be deductible. Do you have multiple properties? Mortgage interest on a second home is also fully deductible. However, in order to qualify for this deduction you have to spend at least 14 days at your second property.
- Points – If you paid points to get a better rate on any of your home loans, that qualifies as a deduction. There’s only one issue: when you get to claim them. The IRS lets you deduct points in the year you paid them if, among other things, the loan is to purchase or build your main home, payment of points is an established business practice in your area and the points were within the usual range. Make sure your specific loan meets these qualifications and others so that you can deduct your points at one time.
- Property taxes – Another major deduction is the property taxes on your new home. If this is your first tax year in your home, find the settlement sheet you received at closing to find additional tax payment information. When the property was transferred to you from the previous owner, the year’s tax payments were divided so that each of you paid the taxes for that portion of the tax year during which you owned the home. The share of these taxes that you paid is fully deductible.
Along with these common deductions, there are a few things that unfortunately can’t count towards your tax deductions-namely insurance, depreciation of your home, general closing costs, and home repairs. But if you do your research and plan ahead, you’ll be able to take advantage of every tax deduction available to you.
Are you a new homeowner? Do you have any tax questions? If so, let us know by leaving a comment!