Did you take advantage of the first-time home buyer tax credit in 2008? If so, you have to pay it back. I wish I was lying, but like George Washington, I can’t tell a lie. Also like George Washington, I have wooden teeth. But all the wooden teeth in the world can’t get me out of paying back this interest-free loan. If you’re in the same boat, read up on the details of this credit and the repayment requirements.
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When major life events change the facts of your life, they can also change your tax situation. With tax season under way, it makes sense to consider how certain events will impact your situation. The Motley Fool has a list of life events that can impact your taxes. One of those things is buying a home with a mortgage.
The good news is that you can get a tax benefit as a result of your home purchase.
Mortgage Interest Tax Deduction
Most consumers have to buy their homes with mortgages. Because a home is such a big expense, few people can just pay cash. In order to help offset some of the downsides of buying with debt, the government allows you to deduct a portion of the interest you pay on your mortgage each year.
However, in order to take advantage of this tax deduction, you have to itemize your taxes. The mortgage interest deduction goes on Schedule A, so you will have to make sure that it makes sense for you to itemize if you want this tax deduction.
The Motley Fool also points out that there are other tax benefits associated with buying a home. If you do some work from your home, you can get a home office tax deduction, it’s also possible to deduct points paid when buying the house.
A deduction isn’t as valuable as a tax credit, but it can still help you lower your tax liability. Since a deduction lowers your taxable income, the amount you pay overall is reduced. Don’t forget to keep the tax information about your mortgage, since it could mean savings down the road.
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