What are the tax deductibles a home buyer should know? How much can you possibly save and gain? These are only a few questions concerning tax deductibles for homeowners.
Valuable Tax Deductibles to Know after You Buy a House
1. Property Tax
The amount you can cut off your taxes varies with your location. In some areas, you need to pay higher property taxes than in other locales. Thus, if you’re in a place where property tax isn’t that expensive, you won’t get that much of a deduction.
However, there are restrictions regardless. You can only deduct up to $10,000 worth of property tax if you’re single, and $5,000 if you’re married. Moreover, it’s wise to remember that this tax break applies when you buy a house for either a primary or secondary residence.
2. Home Capital Gain Tax
When you sell a house, the amount you keep is the real estate capital gain. If you’ve gotten this from the sale of a primary house, then you’re eligible for a nice tax break. If the capital gain doesn’t exceed $250,000 for a single individual and $500,000 for married couples, you don’t have to pay taxes on it.
3. Mortgage Interest
Yes, you can deduct the yearly amount you pay for mortgage interest from your tax as well. Regulations state that you can deduct up to $1 million worth of interest rate.
However, you can’t deduct interest from a reverse mortgage, because the IRS considers it a loan advance. You need to finish paying the entire reverse mortgage before you can deduct its interest.
4. Mortgage Points
In a nutshell, buying mortgage points is paying part of the interest upfront during closing. Each point costs 1% of the entire mortgage amount. Thus, one point is equal to $1,000 when your mortgage is $100,000. You can also use those points as tax deductions.
However, points are meaningless if you only plan to stay in your new house a few years. That could mean paying a higher interest rate than what you would naturally during your stay. Thus, talk with your real estate expert for some suggestions before buying mortgage points.
5. Energy Home Improvements
Have you made energy-efficient improvements or installed a renewable energy source in your home? Think of installing solar panels, solar-powered water heaters, wind turbines, and energy-efficient ceiling fans, among others. Chances are, you’re eligible to enjoy tax-deductible credits depending on what upgrades you’ve made.
Each upgrade has an indicated percentage of its costs for the credits that you can use for a tax deduction. When you install a solar panel, for example, 30% of its cost can become your tax credit. However, you can only get a $50-credit from an energy-efficient ceiling fan.
Thus you should visit the Energy.gov website to see what improvements give significant tax credits for homeowners today.
6. Home Improvement Loan Interest
You can also take advantage of tax deductions from home improvement loans after you buy a house. You can use the loan interest as your deduction. You can deduct the amount of interest you pay on home improvement loans within a year of securing them.
7. Home Office
You can cut a chunk from your taxes when you have a dedicated home office too! The thing is, such space should only serve for work purposes and nothing else. Using it for other purposes makes it illegible for a tax deduction. If you have an office in your house, then you can enjoy around a $5 deductible for every square foot.
How to Take Advantage of Tax Deductibles after You Buy a House
Honesty is the Best Policy
Submitting false information to the IRS to make your tax credit appear bigger would lead to horrible penalties. Thus, it is best to declare honest details to enjoy tax deductions after you buy a house.
Consult with the Right Experts
Next, be sure you talk with expert tax advisors about real estate tax deductions. They can help you determine exactly which deductions apply to your home or situation, which avoids confusion and mistakes.
Consider Getting a Tax Preparation Service
Hiring a tax preparation service can help you sort out all details about your real estate tax deductions.
1. Help You Collect All Necessary Details
Filling out all the IRS forms for tax deductibles is a daunting task. You don’t want to miss a single detail since it can cost you thousands of dollars of possible savings. You don’t want to input wrong details and suffer penalties as well.
That’s why it is wise to let an expert do the job. They can guide you when filling those confusing IRS forms without missing any deductibles for homeowners.
2. Steer You away from Big Hassles
It is not easy to buy a house. You need to go through tedious processes to close a transaction and get your new home. That’s why you don’t want some other hassles after the process. However, tax season comes and demands your time and effort.
With a tax preparation service, you’ll know what documents or receipts to keep on hand to make your filings easier. They will simply the process of what to expect so you can remain organized and confident.
3. Chase the Deadlines
As mentioned, tax preparation services can help you complete all requirements quickly. That means you don’t need to worry about missing the deadlines and paying additional charges. You want to save from taxes, after all.
With these benefits that a tax preparation service brings, it’s sure worth paying for their services than losing your chance to enjoy tax deductibles. After all, they cost far less than what you can lose without their help.
Take Advantage of these Tax Deductibles When You Buy a House today!
Everybody wants to enjoy the benefits that tax deductibles bring. And for homeowners, tax credits from buying and owning a home sure are fantastic! That is why you should know the tax deduction opportunities available for homeowners and take advantage of them.