Between your kids, your spouse, and your real estate agent, you’ve got enough people to consult about buying or selling your home. But your accountant should be another valued consultant for your next big move.
And whether you’re looking to buy or sell, you’ve got a big decision to make with a lot of moving parts. It’s easy to get sidetracked or overlook a few key factors here and there when you’re buying or selling a home, but the tax implications you may encounter should always be an important, central issue for you in the process.
Depending on your personal financial situation, your home buying/selling process could have serious tax consequences or none at all.
If you’re a new homeowner, there are some significant tax deductions available to you that can greatly reduce your tax bill. That’s because buying home is an investment in which you can begin building equity. And even though mortgage payments can be high, a few tax deductions here and there can actually reduce your tax bill. There are quite a few breaks available to you, but some of the less obvious ones include:
- Mortgage Interest
- Real Estate Taxes
- Home Improvements
- Energy Credits
Points are percentages of the home loan paid to the lender in order to secure your mortgage. If you pay these extra percentages or convince your seller to pay them, the dollar amount becomes deductible.
Deducting the Mortgage Interest is most often the biggest tax break for homeowners. This can actually become an annual practice.
Real Estate Taxes can also be deducted on an annual basis. You can deduct only the actual local property taxes paid out of your account during the year.
Save receipts and records for all your Home Improvements, including landscaping, fences, and kitchen and bathroom upgrades. You can’t deduct these expenses now, but you can add them onto the purchase price of your home when you’re ready to sell your home.
You can earn Energy Credits for adding solar panels and big energy-efficient appliances/upgrades to your home. A tax credit is more valuable than a tax deduction because a credit reduces your tax bill dollar-for-dollar.