I purchased a house this year. Would I qualify for any tax deductions on a home purchase?
Unfortunately, most of the expenses you paid when buying your home are not deductible in the year of purchase.
The only tax deductions on a home purchase you may qualify for is the prepaid mortgage interest (points). To deduct prepaid mortgage interest (points) paid to the lender if you must meet these qualifications:
- Your main home secures your loan (your main home is the one you live in most of the time).
- Paying points is an established business practice in your area.
- The points you paid weren’t more than the amount usually charged in that area.
- You use the cash method of accounting. This means you report income in the year you receive it and deduct expenses in the year you pay them.
- The points you paid weren’t for items that are usually listed separately on the settlement sheet. Ex: appraisal fees, inspection fees, title fees, attorney fees, or property taxes
- The funds you provided at or before closing, including any points the seller paid, were at least as much as the points charged.
- You didn’t borrow funds from your lender or mortgage broker to pay the points.
- You used your loan to buy or build your main home.
- The points were computed as a percentage of the principal amount of the mortgage.
- The amount shows clearly as points on your settlement statement.
Other fees that you paid before or at closing aren’t deductible. However, they’re included in your basis of the home. These fees include:
- Title insurance
- Abstract fees
- Recording fees
You can deduct some of the ongoing payments you make for owning your home, including:
- Real estate taxes actually paid to the taxing authority
- Qualifying home mortgage interest
- Mortgage insurance premiums
You can’t deduct these:
- Property insurance
- Utility payments
If you sold your home before living in it for three year do you have to repay the first-time homebuyer credit? Learn more from the tax experts at H&R
Do you earn an income in Louisiana? If you answered yes, read on to find out more about how and when to pay your LA income tax.
Can you split donations with your spouse if you itemize deductions and file married filing separately? Learn more from the tax experts at H&R Block.
Looking for information on the Illinois property tax rate? Read here to learn who owes, how to pay and more with H&R Block.