New Home Owner - Tax Write Offs? (sale, real estate)

[purelygeneric]

Any advice for a new home owner as far as taxes go? Are there certain things that can be written off such as improvements, etc.?

Everyone keeps saying it will help with taxes when it comes to the IRS. Exactly how, is not clear to me. Thanks!

[Kbinspections]

When you sell the house, not when you buy it.......

Improvements to the home will lower the capital gains on the sale of the house.

[Elke Mariotti]

Originally Posted by purelygeneric

Any advice for a new home owner as far as taxes go? Are there certain things that can be written off such as improvements, etc.?

Everyone keeps saying it will help with taxes when it comes to the IRS. Exactly how, is not clear to me. Thanks!

There are a few ways, actually:

1. the interest portion of your mortgage is an eligible itemized deduction
2. the real estate tax portion of your mortgage is an eligible itemized deduction
3. certain energy saving improvements are (or will be in 2009) eligible for tax CREDITS (see note)

Basically, if you're in the 25% (Federal) marginal tax bracket and say 5% NYS tax bracket, and your interest (NOT principal) payments plus real estate taxes add up to $12,000/yr, your taxable income is reduced by that amount and you could save $3,600/yr combined as a result. Of course I don't know your individual situation, so this is for demonstration purposes only!

note: tax CREDITS, are dollar for dollar reductions of taxes due; itemized deductions reduce taxable income and thereby lower taxes due.

For more information, if you have an accountant, ask him/her. If you do your own taxes, go on the IRS website and do a search.

Does this help???

[Elke Mariotti]

Originally Posted by purelygeneric

Any advice for a new home owner as far as taxes go? Are there certain things that can be written off such as improvements, etc.?

Everyone keeps saying it will help with taxes when it comes to the IRS. Exactly how, is not clear to me. Thanks!

One more thing:
if you paid points, a pro-rated portion (depending on the length of the mortgage) is also an eligible itemized deduction; if you sell the house before the mortgage is paid off, the remaining balance can then be used as an itemized deduction in the year of the sale.

[Chrisk327]

To add more to what Elke said.

Points are deductable in the year they are paid. If you paid them upfront cash, then you can deduct them when you purchase your house. If you finance them over the term, they are deducted over the term of the mortgage and if sold prior to the term, at sale.

Also, deducted in the year of purchase would be RE taxes paid at closing. This would be if you actually paid the seller for a payment that they made previously, not an escrow amount. This probably will not be listed on the 1099 from the bank at year end.