Homeownership and taxes?

Question

I am in the process of buying my first house. I know you can deduce things from your taxes as a result. What exactly are the deductions? I know that interest on the mortage is one, basically my question is what do I need to keep, like inspection recepts, paint/remodeling expenses? Do things like that matter?

Answer 1

I am listing the most common deductions below:
tax deductions:

regarding the mortgage:
mortgage interest
private mortgage insurance (if you make less than $109k)
loan origination fee/discount points

other homeowner deductions:
property taxes

Paying money to fix up your house isn't usually tax deductible. But if you take out a home equity loan to pay for it, the interest on that loan is tax deductible.

Note:
If it turns out that you profit over $250k when you sell the house, then you might need the receipts from the home improvements, but that is not likely since you are buying your first house.

Answer 2

You can deduct the interest on the mortgage and and taxes paid for the property. That is basically ALL you can deduct. inspection costs MAY adjust your basis and effect the amount of gain you have when you sell. Painting / general repairs have NO tax effect. Remodeling, it it increases the value of the home, would increase your basis for computing a gain at the time of sale. Unless your gain is more than $250,000, under current tax law, you can exclude the gain anyway, so reducing it may not help.

Note: some answers mention 'points' and 'origination fees' in addition to interest. These actually ARE prepaid interest. The IRS knows that and that is why, they are deductible.

Answer 3

You are correct regarding Mortgage Interest but keep in mind if you are at a certain income Alternative Minimum Tax is phasing out the deductible amount. (Contact your Congresspeople and Representatives) Real Estate Taxes paid are also deductible.
The other costs only will go against any Capital Gains you may receive from the Sale of this Home if you are even subject to capital Gains ....

Good Luck & Bless

Answer 4

You can deduct mortgage interest and real estate taxes in the year they're paid, if you itemize.

Remodeling costs are added to the basis of your house when you sell it, so would reduce the taxes then if you owe any on the gain.

Maintenance costs like painting are not deductible, so don't bother to save those receipts. Inspection costs aren't deductible either.

Keep your closing statement from the purchase so you have the info you need to calculate gain when you sell.

Answer 5

NOPE

Mortgage interest, points paid and real estate taxes

The only taxes that are deductible are those that are assessed based on VALUES. If you received a sewer tax based on having 2 bathrooms or 100 feet of frontage then it is not a tax.

NOTHING ELSE IS TAX DEDUCTIBLE, unless you use a portion of your home for business purposes (which is a different story and can increase your chance of being audited).

For 2006 + 2007 Certain home energy items can provide you with Residential energy credits. See IRS website for form 5695 instructions.