Your favorite easy chair is finally in a perfect spot, the Plasma is hanging on the wall just right and you can finally call it “Home-Sweet-Home.” Once you are a homeowner – especially a first-timer– owning your first house can have its perks including a handful of nice tax benefits that could reduce your tax bill.
This basically equates to good news as many new or first-time homeowners may be able to take advantage of several tax deductions when they buy or refinance a house, according to tax experts. Here are some examples of how buying your first house could help with taxes:
Claiming the Mortgage Interest Deduction
When you first buy a home, the majority of the monthly mortgage payment will consist of interest. The amount of interest you pay is the highest at the beginning of the loan, so first-time homebuyers may be able to deduct the mortgage interest and get a bigger tax refund.
To claim a mortgage interest deduction, experts say to itemize deductions instead of taking the standard deduction. If the total amount of mortgage interest you’ve paid is more than your standard deduction, you’ll likely benefit from itemizing your deductions on Schedule A, experts say. Your lender should send you a Form 1098 at the end of the year with the amount of mortgage interest you paid during the year making it easier to figure out.
Writing-Off Property Taxes
Property taxes may also offer a tax break for first-time homebuyers. If your mortgage payment includes your property taxes, remember to keep up with the amount you pay during the year. You can also write this off as an itemized deduction on Schedule A, experts say.
Home Office Deduction
If you work out of your new home regularly, you could qualify to use the home office tax deduction. Under this provision, you can write-off a portion of a number of home maintenance costs granted they are used for the work space. Eligible deductions often include utility costs, home repairs, and Internet fees. It’s all about remembering to use the same space regularly and exclusively for your home-based business.
On A Shoestring
Also, throughout the year, think about setting aside some money or stay on a budget in case an emergency pops up, or if you end up owing more than you expected.
Of course, buy a home can offer substantial tax benefits for many individuals, especially if they are careful about documenting the purchase and claiming the deductions. If you can write-off your mortgage interest, property taxes, and home office expenses, you may discover buying a first home could have a positive effect on your annual tax return.
For many, owning a home can be rewarding; After all it’s always a bonus knowing you can put furniture wherever you want or paint the walls whatever color you wish without asking the landlord for permission. So, go ahead and splash those ordinary white walls with a vibrant hue and hang all of the pictures you want!
