There are many benefits to being a homeowner, one of which is the tax deductions that you are entitled to. There are a few different areas where you can get a break but you should always consult with a tax consultant to make sure it is done properly.
- Mortgage Interest Deduction - This is a deduction available for mortgages on your primary, or secondary home only. This is one of the most commonly known tax breaks that are taken by homeowners, but for first time buyer who have done already owned a home often are not quite sure about. Keep form 1098 Mortgage Interest Statement from your lender this will tell you exactly how much interest you paid on your loan. If you have paid more in interest than the standard deduction than you may benefit from itemizing your taxes to be able to get more than the standard.
- Mortgage Insurance Premiums - Homeowners with new mortgages that have the primary mortgage insurance are also eligible for an additional tax break. In order to qualify for this tax break your Adjust Gross Income must be less than $109,000. Unfortunately if you make over that you will not be eligible to partake in this deduction.
- Energy Star Deductions - This is a great deduction, and it is not limited to just first time buyers, it is for all homeowners. In order to get this deduction you should be sure you stay organized with any of the new appliances or improvements you make to you home by saving the receipts because there is no set documentation required. Many manufacturers will advertise if the product is eligible for this kind of deduction. Everything from appliances, windows, even solar panels improvements can be tax deductible. The one catch is you are not eligible to deduct for the cost of insulation, and some items have a maximum amount you can get credit for. For a full list of what items are eligible for tax deductions please refer to Energy Saving Information.
- Property Taxes - This a great deduction because there is no limit to what you can deduct obviously you can not deduct more than what you paid, but you do not need to meet any income restrictions. This is a line item on your normal tax return, and does not require an additional "schedule".
Something all new homeowners should be aware of is that you are eligible to grieve your property taxes which is different from taking the deduction for your property tax.
I will usually recommend grieving your taxes I personally do so every year, when you grieve your taxes they can not be raised so it makes it a worthwhile investment of your time. Many companies offer to do the paperwork for you and split the savings with you at the end of the day. When you are in the process of buying the home you should ask to know what the assessed value of the home is, just for your knowledge.
So lets say you purchase a home that is currently being assessed at $300,000 which could put your taxes around $9000, but you purchased it for say $250,000 than your home is over assessed. This is the perfect time to grieve your taxes, it is also recommended for those sellers to do this prior to listing your home if you are over assessed.
For more information on Grievance Procedures please refer to the NYS Website.
I am getting quite a few questions about the First Time Homebuyers Credit, and unfortunately it is no longer available for 2012. First time homebuyers are still entitled to pull money out of their IRA penalty free towards the purchase of their first home, and I will be writing another blog about this as well as Affordable Housing Developments for first time homebuyers in the next few weeks!