You’ve known this was coming; all the same, familiar signs have been haunting you for weeks. And after driving around seeing folks dressed up in teal green robes waving frantically as you speed by, and receiving shiny flyers with Uncle Sam angrily pointing in your direction–you can’t ignore the facts anymore: It’s tax time, ready or not.
But don’t sweat it too much, because as a homeowner you’ll likely be able to qualify for tax deductions related to owning a home. Not quite sure what deductions apply to you? For expert advice, I talked with Lisa Green, VP of Loan Origination with Allen Tate Mortgage to learn about the different deductions available to homeowners.
“The largest tax break available to homeowners is directly tied to the monthly payment you’ve made each month, as for most, a significant portion of your total amount due goes towards interest,” says Green. The good news here is that all of that interest is deductible. This includes what you have paid in interest each month on your mortgage and any interim interest you paid at closing. Green says you can find the interim interest figure on your Closing Disclosure. And if you happen to own a second home, the rule applies here, too.
Don’t forget about points, says Green. “If you paid any points at closing to obtain a lower interest rate, these may also be claimed as a deduction in this first tax year after the purchase of your home.”
Private mortgage insurance
Many first-time homebuyers also have Private Mortgage Insurance (this is required when you have less than 20 percent down). Check with your accountant as your Mortgage Insurance may also be deductible, depending on your income. “Mortgage Insurance is usually an addition to your monthly mortgage payment, but it is possible that you elected to pay it as a lump sum at closing,” says Green. Check your Closing Disclosure for this information.
Did you move for a new job, or transfer to a new location for your existing job? If so, there’s a good chance that you can deduct some eligible moving expenses. You’ll need to verify that you are eligible, but you may be entitled to claiming some deductions like mileage and hotel expenses.
There are other possible deductions that you may be eligible for, including credits for energy efficiency, deductions for home office, etc. Your accountant or tax professional can advise you on others that you may qualify for.
“While filing your taxes may be a bit more complicated, the benefits of homeownership more than outweigh a little more paperwork when it’s tax time,” says Green. Take a moment to celebrate the joy of owning your own home, and the tax advantages of homeownership.