As a first-time homebuyer, mortgages and moving are probably uppermost on your mind. But your new home also offers tax benefits that can save you money.
Here are four you can claim on your federal income tax return if you itemize:
1. Mortgage interest.
Interest on the loan you take out to buy your home is deductible, within certain limits, even if you borrow from a nontraditional lender such as a private seller. Interest paid at closing, late payment charges, and penalties assessed for paying off your mortgage early are also deductible.
2. Points.
Sometimes called loan origination fees, points are calculated as a percentage of your loan amount and are paid to your lender upfront at closing. For federal tax purposes, points are generally considered interest that can be deducted. You can also deduct points paid by the person who sells the house to you.
3. Real estate taxes.
Property taxes based on the value of your home are an itemized deduction in the year paid, whether you pay them yourself or your mortgage company writes the check for you. This includes the amount you paid at closing for current-year taxes, though delinquent taxes owed by the seller for prior years may not be deductible.
4. Mortgage insurance premiums.
Depending on your income, you might be able to write off the mortgage insurance premiums you pay during 2007. This one-time benefit is scheduled to expire in December, and only mortgage insurance contracts issued in 2007 qualify.
Additional tax deductions are available. For instance, even if you don't itemize, certain expenses incurred in moving to your new home can reduce your taxes. Please call our office for more information.
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