If you’re a first time homebuyer, you’ll be pleased to know that there are a number of major tax deductions for homeowners. Here are a few of the deductions that can save you thousands:
1. The top tax deduction is, undoubtedly, your mortgage interest. This is almost always the biggest home-related deduction for new borrowers, as the majority of the monthly payment goes toward interest. (If your loan is more than $1 million, you may be limited in your deduction.)
2. Property taxes! This type of tax is fully deductible, and you can determine the exact amount of property taxes paid by taking a look at the annual report provided by your lender. If you bought in the middle of the year, dig out your settlement sheet to determine exactly how much you paid in taxes, since they were split with the previous owner of your home. Don’t have your settlement sheet? Be sure to ask your real estate agent or title company for another copy.
3. If you purchased points to lock in a better interest rate on your new home, you’ll be able to deduct this cost too. If you purchased points to refinance, different rules may apply.
4. Home improvement loan interest is fully tax-deductible, as long as the work results in a “capital” improvement. A capital improvement refers to a project that increases your home’s value, including installing a swimming pool, a new heating/cooling system, or a new roof.
5. If you moved over 50 miles for a new job, your moving costs may be tax-deductible. This may include travel or transportation of household items, lodging expenses, and storage fees.
As with all tax and finance advice, EveryHome recommends consulting with your accountant for individualized assistance.