First-time home buyers often feel overwhelmed because of the expenses that need to be paid to buy a home. But, it is important that you don’t overlook some of the financial benefits that are available for the purchase of your first home. With the guidance of an experienced real estate agent, lender, and accountant, you can maximize these tax benefits to take care of your family finances:
Mortgage Interest Deductions
The interest costs are highest at the beginning of the mortgage, but these expenses can be used as a tax deduction. There are a few requirements that need to be met, such as having less than $1 million on the mortgage and the property needs to be a qualified home (your main or second home).
Writing off your mortgage interest is easy and one of the tax benefits. At the end of the year, you will receive a 1098 form from your lender. Provide this paperwork to your accountant when it is time to file your taxes.
Real Estate Taxes
When you close on the property, taxes will need to be paid to the local or state government. This amount is calculated based on the value of the property. Usually, this number is factored in by the lender, and the money is set aside in an escrow account.
In most situations, you can deduct the money that comes out of the escrow account for the purpose of paying the taxes as another of the tax benefits. You will see this information listed on your 1098 tax form at the end of the year.
Private Mortgage Insurance
If you didn’t have a large down payment for the purchase, then you might be paying for Private Mortgage Insurance (PMI). This insurance coverage is designed to protect the bank if you default on the loan, and is often a condition for first-time buyers.
The tax deduction for PMI is only available for certain joint income ranges. Ask your accountant if you qualify for this deduction.
Capital Gains Relief
Another of the tax benefits that you can enjoy will be realized when you sell the property in the future. Buy a home now, and then take advantage of the strong real estate market to maximize your equity. You must live in the property for at least two of the last five years before selling. Then, you can avoid paying taxes on $250,000 of gain on the property, or $500,000 for a joint filing.
Are you excited to buy a home for your family? Whether it is your first home or you are ready to upgrade to a new property, our team at DUFFY Realty is here to help! We are the leading real estate team in the Atlanta area, and we would love to help you find the home of your dreams and take advantage of these tax benefits. Contact us also to learn more about the benefits of flat-fee real estate commissions so that you can save thousands of dollars: (678) 318-1700