Tax Benefits for New Homeowners: New Home, New Savings, How to Benefit from Tax Perks by Chafin Communities

Buying your first home is a significant financial milestone. Fortunately, as a first-time home buyer, there are opportunities for you to save thousands of dollars on taxes this year. Understanding what is deductible versus what isn’t can help you maximize your savings and make the most of these valuable opportunities. With the proper information, you can reduce your tax burden and keep more of your hard-earned money.

Mortgage Interest Deduction 

Homeowners can deduct home mortgage interest on up to $750,000 for individuals or married and filing jointly. If you are married and filing separately, $375,000 is generally the limit. For many buyers, especially early in the loan term, a large portion of their monthly mortgage payment goes toward interest rather than principal. That being said, this can be a significant deduction, reducing your taxable income. 

Property Tax Deduction 

You may be able to deduct up to $10,000 a year on certain state and local property taxes. Property taxes can be a substantial expense, but by deducting them from your taxable income, you can reduce your overall tax liability. 

Mortgage Points Deductions 

When purchasing your home, you have the option to pay mortgage points in exchange for a lower interest rate. These discount points are a way to prepay interest on the loan. Within specific guidelines set by the IRS, homebuyers may be able to deduct discount points as interest. 

Home Office Deduction 

If you are self-employed, the home office deduction can be a valuable tax break for you. If you use a part of your home exclusively for business purposes, you may be able to deduct a portion of your mortgage interest and other expenses. Make sure that you fully understand the guidelines to be eligible for the deduction. For instance, working from home for another employer does not count for the deduction. However, it does apply to small businesses owners and self-employed individuals. 

Deductible or Nondeductible? 

While there are many opportunities for tax savings, there are also some expenses that are not deductible. You can not receive tax deductibles on insurance, utilities, HOA fees, home repairs, and other similar expenses. If you have questions or you are uncertain on what qualifies for a deduction, it is a good idea to seek guidance directly from the IRS. 

If you purchased a home this year, now is the time to take advantage of these tax benefits while they apply to you. These tax breaks may help ease the financial stress of purchasing a home, but it is important to understand how to make these benefits work for you. For the most up-to-date information and personalized advice, you may want to consider seeking help from a tax professional who can ensure you’re maximizing your savings. 

Feeling ready to buy your first home? Contact us today! We are here to help you navigate through this exciting process and make your dream home a reality.