Key Takeaways

  • First-time homeowners can take advantage of some new tax deductions
  • These deductions allow new homeowners to itemize when they couldn’t before
  • Know what deductions you can take advantage of before the end of the year

Homeownership Means More Tax Deductions

We just helped a young couple close on their first home, and they’re stoked. They have every right to be; buying your first home is a huge milestone.

And after all the paperwork and financial hurdles are overcome, it is such a relief to finally have those keys in your hand.

Fortunately for them and for other first-time homebuyers, there are a number of ways that achievement can help them that they probably don’t even know about yet. I’m talking about tax savings.

Mortgage interest deduction

I’ll be honest, that mortgage payment is going to feel overwhelming for the first few months, if not for the first year. It’s a large chunk of cash going out the door, but you’ll be happy to know that the interest portion of your payment is tax deductible. I have even better news – when you’re just starting out, most of your payment is interest.

Real estate tax deduction

Property taxes are prone to fluctuate. However, the money you pay toward real estate taxes is tax deductible. That means when property taxes rise, so do your tax deductions.

Charitable donation deduction

Before you purchased your home, your standard deduction was likely greater than your itemized deduction. Thus, you wouldn’t be able to benefit from itemized deductions, like charitable donations. As a homeowner, your mortgage interest and real estate taxes will allow you to itemize, making you eligible for additional deductions.

First-time homebuyer? Save your closing statement!

If you just bought your home, have your closing statement (HUD) ready to go. Additional expenses incurred on your HUD may be tax deductible, like any prepaid interest you may have paid at closing.

 

By the time you get all situated and enjoy your first holiday season in your new home, it will be tax time before you know it. Having this info handy will help you take advantage of any tax deductions available to you.