Did you know that every year, there are changes made to the tax code? That means that if you are planning to buy a new home in 2017, the tax breaks that apply to you could differ from previous years’ rules, and certainly rules in the future. Here are some tax breaks that every first-time homebuyer should know about.
One of the biggest perks of being a homeowner is that you can deduct your home mortgage interest. Because home amortization works by applying the highest ratio of interest to principal to your first payments, the home mortgage interest deduction is something that homeowners especially benefit from during their first year of owning a home.
2. Penalty-free Withdrawal from IRA Savings
You may know that if you withdraw funds in your IRA before reaching retirement age, you will have to pay an early withdrawal penalty. However, did you know that this penalty can be bypassed if you dip into your savings for the purpose of acquiring funds for a down payment on your first home purchase? That’s right – you can take a certain amount (consult your local Loan Officer for specific dollar amounts) from your IRA to put towards your down payment without being penalized for the withdrawal. Bear in mind, you may still have to pay taxes on it.
3. Home Improvement Tax Breaks
Do you need to make improvements on your home? If so, you should consider taking out a home equity loan to do it. When you use a home equity loan to finance improvements, you can deduct the interest on this loan just as you can deduct your mortgage interest.
4. Local Property Tax Deductions
When you buy a new home, you will have to pay property taxes on that home. You are allowed to deduct any of the real estate taxes paid to the taxing authority when filing your taxes. You can refer to the website of the IRS for more information about exactly how to do this.
5. Mortgage Interest Credit
Another tax benefit that first-time homebuyers can take advantage of is the mortgage interest credit, which is different than the mortgage interest deduction benefit. The mortgage interest credit directly counts against your tax bill, and allows you to claim 20 to 30 percent of the interest you pay every year back as a straight credit on your taxes.
Look to Hayden Homes to Find Your Brand New Home Today!
Buying a new home is a large expense, but it can also serve a number of financial benefits, too. If you have been thinking about buying a new home but aren’t sure if it’s the right decision for you, we have written a number of blogs regarding zero-down loans, costs of a new home, and more. To learn more about Hayden Homes, the benefits of a brand new home, and how we can help you to secure financing, contact us today! When you choose Hayden Homes, we help you find your dream home in Idaho, Oregon, Washington, and all throughout the Pacific Northwest!
With the recent changes to the tax laws that were past at the end of 2017. These will affect your taxes and what you can deduct beginning in 2018, therefore, we highly recommend that you consult your local Tax Accountant for specific items that you can take advantage of as a homeowner.
We talk about a few of them in our Blog on How the 2017 Tax Bill will affect homeowners.