Many individuals are unaware of the ability to claim deductions when buying a new house. This newly acquired is not simply a place to call your own, but, a tax shelter that you is actually a goldmine with four walls. It provides you with a income tax advantages that, if you understand what deductions you are eligible for, can make a great deal of difference come tax time.
The following items, care of H&R Block, are the common deductions that you can find on Schedule A:
- The mortgage interest that you pay along with what you outlaid for real estate taxes are deductible
- Medical and dental expenses
- State and local income taxes
- Personal property taxes (what is usually found with your personal vehicle)
- Gifts you give to charitable groups, such as donations, but, remember, you need to obtain a receipt that shows the group is a registered charity
- Casualty and theft losses
- Employment related expenses
- Fees realized in tax preparation
- Investment expenses
- Gambling losses to the extent of your winnings
Of course, all of these deductions are subjected to limitations, therefore, like any income tax form; you need to carefully read everything in that document.
Perhaps the best deduction is on the mortgage insurance that you pay out and can benefit from during tax time. You can actually deduct interest on the loans you pay up to a million dollars, five hundred thousand ($500,000) if you use the married but filing separately status; but, with one caveat, you must have used this money to buy, build or improve upon your home. If you secure a loan through your home and use it for any other purpose than to buy, build or improve your home, you can claim deductibles for loans up to one hundred thousand dollars ($100,000) or fifty thousand ($50,000) if you file with the married file separately status.
Another point to mention is just that, points. These are also called loan origination fees. The formula followed is this: one point = one percent of your loan. The points that you pay (even the points the seller pays) whenever you buy a new home can generally be deducted in full the year that you pay them. If you chose the amortization method, you can spread the points over the term of your mortgage.
Now, what if you want to move up into a bigger, better house, do you get any tax breaks? Yes, you do. You are allow to exclude from any taxable income gains on the sale of your home up to $250,000, but, $500,000 if you file jointly with your spouse. Bad news is, you can only claim this once in a two-year period.
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