What Benefits Do First Time Home Owners Enjoy?

What-Are-The-Top-Benefits-For-First-Time-Home-Owners?Buying and becoming a new homeowner can be a difficult challenge, and an extremely rewarding endeavor once you own your first home. As a new homeowner, you gain access to several different tax benefits for both primary or secondary residents such as vacation homes. With recent changes to the federal tax law, it is important to review how home tax credits were affected. There were many alliterations of the tax bill reported on in the press and luckily many of the more severe recommendations were not passed in the final bill. However, some changes were made and are reflected below where applicable. Here is a broad overview of the five federal tax credits you can claim as a homeowner.    

 

Real Estate Taxes: Referring to state and local property taxes, under the proposed changes to the 2018 tax bill, this is a deduction cap of $10,000 total for state and local property tax and associated income or sales taxes. This limit is the same for both single and married couples filing jointly.  

 

Concerning Your Other Deductions: When taking a tax credit for mortgage-related tax benefits you have to itemize your deductions. This can be highly advantageous because it allows you to take credit on other non-home related tax write-offs that have to be itemized to be claimed. These include unreimbursed employment expenses, charitable giving, medical expenses, and others.  

 

Loan Interest Deduction: For 2018 you can deduct interest payments on your home’s mortgage as long as your mortgage is less than $750,000 or $375,000 for married couples filing separate returns. Note that these figures were higher in previous years but recent tax law changes resulted in the above figures. Unchanged is the fact you must have a loan secured by the home and the home must be your main or secondary residence.      

 

Points: Note the interest you paid upfront during the mortgage closing process. As this type of payment improves your overall mortgage rate, most closings have points to some degree. These are deductible provided you meet several specific criteria. Key amongst these is that points must be paid with a secured loan, the loan in question must be secured by your main home, and the mortgage loan goes toward your home’s purchase or construction. Also, note your points total value must be in the ‘normal range’ for your geographic area and the surrounding home market values. Figures deemed unusual may result in this credit not being usable.  

 

Future Tax Benefits: Lastly, you can claim a capital gains write off when you sell the home in the future provided you meet the habitation requirements. You have to live at the residence for 2 of the last 5 years and these two years do not have to be concurrent. By meeting these requirements you do not have to pay taxes on gains on a home sale up to a specific amount. The limits are $250,000 if filing single or $500,000 if filing jointly. This law was unchanged in the 2018 Tax Bill despite being considered at various points for modification or outright removal.    

 

Final Considerations

As the above shows, there are several tax advantages to purchasing a home. Despite changes made to the tax code these benefits are still ones that should not be ignored and should be correctly accounted for on your tax return. As always should you need further clarification on these or similar real estate matters, a knowledgeable and professional realtor will be able to give you a bit more detail.

 

Whether you need to sell your home, or solely looking for one to buy; let’s talk about what’s available today.