It’s a new year, and that means tax season is just around the corner. If you are a new homeowner, chances are you already rushing to pull together your receipts, deductions, and income statements in preparation. As you look ahead to filing your taxes, keep in mind that there are a number of deductions you can claim to help reduce your tax bill.
For most new homeowners, the interest payments on their mortgage make up the largest aspect of their payments. Fortunately, the tax code allows homeowners to deduct the mortgage interest on their taxes.
Closing Cost Deductions
During the first year after purchasing your home, you are allowed to claim the origination fees (points) on the loan. Since origination fees of 1% or more are common, this can mean considerable savings.
Property taxes on your primary residence are fully income tax deductible.
Many people are unaware of this, but you can actually deduct the cost of home improvements that are made for the health of those living in the home. Improvements like installing safety railings, entrance ramps, and other improvements that are medically-sound can qualify.
Home Office Deductions
If you have an area of your home that is designated exclusively as a home office, and used as your primary place of business, you can log it as a deduction on your taxes. Under the new tax rules, you can deduct $5 per square foot of the designated office space up to 300 feet. If you have a sizeable home office, the savings can be considerable.
Going green isn’t just a great way to reduce your monthly energy bill. There are tax incentives for making significant energy efficiency improvements to your home. Improvements like installing double pane windows and new insulation allow you to deduct up to 10% of the total cost up to a maximum of $500. Upgrading to energy-efficient equipment such as solar paneling allow you a credit of 30% of the cost.
As you prepare to file your taxes for the year, keep these deductions in mind. They are a great way to recoup some of your expenses from a new home purchase.