There are many advantages to owning your own home, and one of the rewards that homeowners typically enjoy comes at a normally stressful time of the year: tax season, in the form of a lowered tax bill thanks to deductions you are able to take on your home!
If you’re a first time homebuyer, you might be unaware of the tax deductions you are able to take on property and real estate that you own, so we’ve compiled our top 3 tax tips and hints that as a first time homebuyer you should know about:
Itemize your federal return
In the past you might have just used the standard deduction offered to taxpayers each year when you filed your taxes. Once you own a home, however; it will likely make better financial sense for you to itemize your taxes instead of taking the standard deduction. This is because you can deduct your mortgage interest payments, private mortgage insurance (PMI) paid and property taxes from your total income! These deductions, especially in combination with other deductions you might be able to claim such as any charitable donations you’ve made over the past year often far exceed the amount of the standard deduction and can make a big difference on how much you’ll owe, or get back.
Get more green back in your pocket by going green
Some energy-saving or “green” home improvements will earn you an additional tax break, usually through a direct credit on your taxes. There are both federal and state tax credits available for some green improvements made to homes like the installation of solar panels, solar water heaters, or energy-efficient windows. Check with your accountant, or your state tax rules to find out what might be available to you.
Keep all your records
This tip might seem like a no-brainer, but for many people it’s easier said than done. We can’t emphasize enough how important it is to keep accurate and complete records though. Saving those receipts and proofs of payments may be all that stands between you and a lowered total tax bill. Additionally, keeping track of all improvements you’ve made to your property may have tax implications at the time of sale, and may save you a lot of money down the road.