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issue :.
I think about buying a new home. What are the tax benefits
Anna via Facebook
Answer:
Buying a house is a big decision of life and there are many things to consider in your decision making process. These considerations should include the benefits on your tax return now and in the future.
Here are 7 tax advantages of buying a house.
1. Mortgage interest
Most people do not have the luxury of buying a house outright. In general, most buyers to get a mortgage to buy a new home.
Each mortgage payment is the interest of the room, main room. The interest paid during a year is deductible for taxpayers who itemize their deductions. You should receive Form 1098 from your financial institution with total mortgage interest paid during the tax year. You can then claim the interest paid as an itemized deduction on your tax return (Annex A).
2. Property Taxes (property taxes)
Similar to the mortgage interest deduction, you can claim the property taxes (property taxes) as an itemized deduction.
In the year of purchase you may have paid these taxes at closing. Otherwise, these fees are usually paid during the year, either directly or through an escrow account.
If your bank makes the payment on your behalf, this information will be reported on your Form 1098.
3. Qualified Mortgage Insurance Premiums
Some buyers need to obtain mortgage insurance to buy their home. This insurance protects the lender if the borrower defaults on the loan.
If you are required to purchase mortgage insurance premiums you pay throughout the year can be an itemized deduction.
4. Exclusion of gain on sales
When you sell your principal residence, the IRS allows all or part of the gain on the sale excluded from income.
If you have ownership of the IRS and use tests, you may request an exclusion of up to $ 250,000 ($ 500,000 for joint filers them) for the gain on the sale of your home main.
5. Home Improvements
In general, you can not deduct the costs of home improvements. However, home improvements can increase the base of your house, what matters in the sale of your home.
The foundation of your home is usually the amount you paid for the home. This amount is used to determine the gain or loss that applies after the sale of your home by taking the difference between the sales proceeds and your base.
By keeping track of all home improvements, you can increase your home base as improvements are made. At the time of the sale, your basis is more than your original purchase price. This will then reduce any gain attributable to the sale of your home.
For example, John bought a house for $ 125,000 (base) and selling the house for $ 0,000. This should normally calculate a gain of $ 75,000.
However, while John was the owner of the house, he added some landscaping totaling $ 10,000. John grew its base of $ 10,000. Therefore, when John sold the house for $ 0,000, he hired a gain of $ 65,000 because its base is $ 135,000, not $ 125,000.
6. Tax credits
While most home improvements can not be claimed as a deduction on your tax return, some improvements can result in a tax credit .
Making your home more energy efficient could increase your refund. The residential energy efficient property credit is worth up to 30% of the cost of qualified property.
7. No punishment IRA Disbursement
If you buy your first home, you can take a distribution from an Individual Retirement Account (IRA) without being subject to early withdrawal penalty 10%.
This refers to a distribution of up to $ 10,000 used to buy, build or rebuild your first home.
first buyers are considered those who did not own a house during the period of 2 years before the date of acquisition.
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