Did you know that there are tax breaks for new home owners? Before you buy a new house, it is best to check if your tax savings will be worthwhile. It is easy to calculate the tax benefits from buying a new house. If you want to have the best savings, make sure that you will not be on the receiving end of additional taxes when selling your old house.
The first thing you need to know is that there are a lot of different tax breaks available if you are looking to buy a new home. There are tax breaks for mortgage interest and home renovation expenses, depreciation, property taxes, charitable contributions, income taxes, property tax, personal exemption, and state and local taxes. Here are some examples of tax breaks for home owners.
Mortgage Interest: There are several tax breaks available on mortgage interest. If you can purchase your home with the mortgage amount, there is no income or capital gains tax needed. In addition, there are no estate tax or capital gains tax incurred when selling your old home. This benefit is applicable to mortgage interest only and not to mortgage the full amount.
Home Renovation: Home owners have the choice to deduct up to 100% of the cost of home improvement such as new carpets, flooring, tiles, painting, and landscaping. There are also tax breaks for home owners who add an extra room to their home. However, the actual cost of the additional room must be greater than the home’s market value. Home owners have to use this benefit according to the value of the home. If you plan to sell your house after a period of time, then there will be no benefit.
Real Estate Taxes: New home owners are eligible for deductions on the cost of home mortgage interest and also can enjoy tax relief on the amount they paid for down payment. The property taxes also qualify for tax breaks. As a homeowner, you get to save a large sum of money on your tax returns if you avail of real estate tax relief programs.
It is important for homeowners to understand the different tax relief options. These programs are designed to provide tax breaks to low and moderate-income households. These tax breaks are aimed at widening the income disparity between rich and poor. Thus, it becomes very important for homeowners to analyze their tax packages and choose the best one that suits their needs.