There are numerous benefits associated with building or buying a new home. Not only do you get to enjoy everything that owning a new home has to offer – building home equity, the modern kitchen you’ve been dying to have, and that new home smell – but there are significant tax advantages. If you find yourself on the fence about buying a new home, here are some facts about tax advantages of home-ownership that may sway your opinion.
Mortgage Interest Deductions
One of the biggest tax advantages of home-ownership, whether you’re building or buying new, is that when you pay your taxes, you are allowed to deduct the amount of interest that you paid on your mortgage for that year. Keep in mind that you cannot deduct mortgage interest for a third, fourth, or fifth home, and the deductions are capped at a certain amount. Still, mortgage interest deductions come in handy when uncle Sam comes knocking on your door each Spring.
You probably know that if you withdraw money from your IRA account before retirement age, you will have to pay a penalty for this withdrawal. But, when it comes to first-time home-buying, the IRS offers a little leniency; for a first-time home purchase, you are allowed to withdraw up to $10,000 from your IRA sans penalty! Doing so can help you to secure the funds necessary for a down payment on a new home! However, bear in mind that while a down payment now can be great, withdrawing $10,000 could mean losing out on funds that would have yielded a good return in the form of compounding interest over the years. That said, we all must start somewhere, and pulling 10k penalty free out of a retirement fund to start enjoying the new home of your dreams now just makes sense.
When you buy a brand-new home, chances are that it is outfitted with some pretty sweet features in terms of energy efficiency, ranging from energy efficient appliances to solar panels to geothermal heat pumps and more. What features your new home boasts will depend on location and the builder. The good news is that by purchasing a new home that is energy-efficient, you not only could be promoting sustainability, but you’re padding your pocketbook, too. Check with your local tax accountant to see what rules apply in your state.
Home Office Deductions
Wouldn’t it be great to have a home office? When you purchase a new home, a home office may very well be a reality. Not only does a home office give you more space to get things done with peace and quiet, you can also deduct home office expenses when filing your taxes if the following conditions apply:
- The home office is your primary workspace
- You don’t use the home office for another purpose, such as a guest bedroom.
Most brand new homes have plenty of room for a home office, or are built with an area that is specifically designed to be a home office. Not only that, they can be outfitted with the latest and greatest home office technology, making them that much more enjoyable.
Find Your Perfect New Home Today
There is no doubt that building or buying a new home has financial advantages. If you are ready to learn more, contact Hayden Homes. We have beautiful, new homes for sale in Washington, Oregon, and Idaho, and are ready to meet with you today.