Taking the leap as buying your first home is exhilarating and exciting. There will be some roadblocks along the way for the first-time home buyers, but there is a big opportunity to lower the cost of your mortgage debt by taking advantage of several tax write-offs. Here are some tax tips that can help you reduce your tax bill by thousands of dollars.
Deduct property and real estate taxes
Did you know the local property taxes you pay each year can be deducted from your tax liability? If you pay taxes through your escrow account, the tax amount may be shown on 1098 form that you receive from your lender. First-time home buyers and existing homeowners both can also directly pay their property taxes to the municipality. In that case, you can check the records online from your lender or banker.
Home mortgage interest deduction
For first-time home buyers or existing homeowners, the biggest tax break from owning your own home comes from deducting a mortgage interest amount. A homeowner can deduct interest up to $1 million of mortgage debt used to purchase or make home improvements. The Form 1098, will be sent by your lender listing the interest you paid during the previous year.
Deduct any mortgage “points” paid
First-time home buyers have to pay “points” to the mortgage lender or banker in order to get a mortgage. Mortgage points are prepaid interest that a home buyer must pay to secure the loan. These points are deductible if the loan is secured by your home.
The deductible amount should be shown on your form 1098, provided by the lender, but if it is not shown there, you will find it on your settlement statement listed as “loan origination fees or “points.”
Save home improvement receipts
First-time home buyers need to make sure all home improvement receipts and records-improvements such as storm windows, fences, landscaping, and any additions are kept safely with them. These expenses aren’t deductible right away, but when you sell your home, the cost of home improvements are added to the home purchase price to determine the cost basis of your home, lowering the amount realized on the sale.
Read more about Homeowner tax breaks
Take advantage of energy tax credits
Did you know some energy-saving home improvements in your beautiful home can earn you an additional tax break, or an energy tax credit? Yes, that’s true. A homeowner can get an energy tax credit for up to 10% of the cost up to $500 for qualifying energy-efficient insulation systems and roofs, skylights, outside doors and windows, water heaters, water boilers, central air conditioners, heat pumps, and furnaces.
Knowing these deductions and tax write-offs may give first-time home buyers a peace of mind and save more money for their home.
Whether you’re a first-time home buyer or an experienced one, don’t hesitate to contact our counselors at www.unitedcounselors.com for best tax savings tips and tricks.