Besides the social privileges and freedom owning a home provides, there are tax advantages to home ownership. Homeowners who are wondering what tax incentives are available, and if there is a new home owner’s tax credit will find a recent post on the American Tax Service very informative. The post summarizes some of the benefits as well as the tax changes from the Tax Cuts and Jobs Act of 2018 that will affect all taxpayers filing as a new home buyer.
There are new major changes in the tax law that homeowners should be aware of. First, the total cap on the mortgage interest rate deduction has been lowered to $750,000 from $1,000,000. The second big change sees the standard deduction doubled. For individual filers, the amount is now $12,000 and it’s up to $24,000 for married couples. There is now a big possibility that the standard deduction might make the mortgage interest deduction now inconsequential on lower-priced homes.
The “First-Time Homebuyer credit” which was up to $7,500 for first-time homebuyers is now expired. And unless taxpayers had their home between 2008 and 2010, they are not eligible for this credit. Taxpayers can, however, claim buying a new house on their taxes. They will not be able to claim the costs of the closing process, but, they can claim any costs associated with mortgage interest, taxes, and insurance costs depending on the exact filing situation. This is capped at a total amount of $750,000 for married filers.
When buying a home, there are a number of fees and taxes applied through the closing process beyond the principal amount paid on the home. Only the taxes associated with the house are going to be eligible for a deduction. Capital gains tax are also a concern when selling a home.
For a clearer understanding of the whole process, please read the full post on American Tax Service here, https://americantaxservice.org/new-homeowners-tax-credit/