Some first-time home buyers want to purchase a home because they are addicted to home renovation shows, and they can’t wait to have a house and yard so they can play “fixer-upper.”
Some buyers want to purchase a home because they want their children to grow up in a family-friendly neighborhood. They want their kids to ride their bikes and have lemonade stands with angelic, well-behaved neighborhood kids.
Some buyers are eager to buy a home because they have read all about new homeowner tax credits.
Even if you identify more with the home buyers in the first two scenarios, it is essential to realize the financial benefits you receive from being a homeowner.
Mortgage Interest Credit
Read this section carefully because this may differ from public tax policies of the past.
If you are in a lower income bracket and have a state-issued Mortgage Credit Certificate, you could qualify to reduce the amount of federal tax you owe. The Mortgage Interest Credit is based on your financial need and the amount you paid for your home.
Talk with a tax professional to see if you qualify for this tax break.
States also want to help individuals buy their first homes. Many of these state programs allow buyers to purchase properties with a small down payment. Other plans allow buyers the ability to acquire mortgage insurance at a reduced rate.
Some of these state programs are income based, and some require a decent credit score. Some require that you purchase a home in a specific area.
Check with your realtor and mortgage company to learn about programs that may be right for you.
Speaking of down payments, if you don’t have enough cash to put a healthy down payment on your first home, you can take out up to $10,000 from your traditional IRA without incurring a tax penalty. Your spouse can also withdraw $10,000 to go toward the purchase of your first home.
Income Tax Deductions Based on Property Taxes Paid
Although you will not reap the benefits of this program until tax season rolls around next year, you will deduct the amount of property taxes you paid last year on your home from your taxable income. Although homeowners used to be able to deduct all of their property taxes, the new cap is set at $10,000.
Capital Gains Tax Deduction
Like the property tax deduction, you will need to be patient before you reap the rewards of the capital gains tax deduction. In fact, you will not enjoy this program until you sell your home.
If your home was your primary residence for the last two out of the five years leading up to the sale, you do not have to pay taxes on the profit you earned from the sale of your home. The amount of tax-free profit is capped at $250,000 for a single person and $500,000 for a married couple.
Residential Renewable Energy Tax Credit
Do you dream of having an eco-friendly home? If you are interested in installing solar panels or high-efficiency systems, you could deduct some costs of these devices from your taxable income. Help the Earth and your bottom line at the same time.
Buyer Rebate Program
A home buyer rebate program is available to buyers who purchase a home through a Clever Partner Agent. Home buyers can receive a $1,000 rebate to use toward the down payment, closing costs, or even new carpet for the basement or other home improvement project.
There are other benefits to working with a Clever Partner Agent. These buyer’s agents will negotiate with the homeowner on your behalf, so you receive the lowest price imaginable when purchasing your first home.
Your Clever Partner Agent will also help you find a mortgage company that specializes in lending money to first-time home buyers.
Whether you are purchasing a house for the tax benefits or buying a home, so your fur baby has a backyard to enjoy, let a Clever Partner Agent walk you through this complicated process.