Buying your own home can be a source of great pride. Often called the cornerstone of the American Dream, home ownership has always been an important milestone of adulthood.
Since house prices tend to rise over time; a home purchase is one of the best investments you can make.
If you already bought your home, congratulations!!! Now, can it help you with your tax returns? The answer is, it depends.
The Interest and Property Tax Portions of your Mortgage Payments are Deductible
Your house payment includes both interest and principal. The interest portion of every payment is tax deductible. Keep in mind that, at the beginning of your mortgage, most of your payment is interest, meaning that the overwhelming majority of your payment may be tax deductible.
Save your closing statement (HUD). When you file your tax return for the first time after buying a home, additional expenses incurred may be tax deductible, including prepaid interest (points) you paid at closing.
You may also make insurance and property taxes payments to your mortgage holder. They in turn pay those amounts when they are due. Money you pay for real estate taxes is tax deductible.
Itemized Deduction vs. Standard Deduction
These deductions are included as part of your itemized deductions. It’s important to understand your total itemized deductions only benefit you if they are greater than the standard deduction.
For 2018, the standard deduction by filing status are:
|Filing Status||Standard Deduction|
|Single, or married filing separate||$12,000|
|Head of Household||$18,000|
|Married filing jointly, or Qualifying Widow(er) with dependent child||$24,000|
The standard deduction is higher if you are blind or at least 65 years of age.
Other items that are included in the itemized deductions include, charitable donations, medical and dental expenses and gambling losses (limited to gambling winnings).
If you bought a house in the prior year, talk to your tax preparer to determine if it’s to your advantage to itemized deductions this year. You will be allowed to pick the higher deduction amount.
Selecting a tax preparer is a very important decision. Make sure whomever you decide to work with is a good match for your needs and has experience with your type of business and transactions.
Accounting Freedom Solutions LLC, (941) 284-5763
The information contained in this blog is only general information. Before making any decision or taking any action that may affect your business, you should consult a qualified professional advisor about your specific situation.