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Tax Benefits Buying A House

Apr 16, 2021

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5 Tax Benefits Of Buying A Home

 

Homeownership is an expensive endeavor. Fortunately, the federal government and state and local governments all offer tax benefits to people who are buying a home. 

 

Tax law changes from year to year, so make sure you check with a CPA or tax expert when filing your taxes to make sure you qualify for any of the deductions or credits below. To take advantage of several of these benefits, you'll need to itemize your deductions on your taxes.

 

If you're in the market to buy a home this year take note of these tax benefits for buying a home and you could save yourself thousands of dollars in the long run.

 

HOME MORTGAGE INTEREST DEDUCTION

 

If you've accrued interest on your home mortgage, the IRS allows you to deduct it from your taxes.

 

The law around mortgage interest deductions changed in 2017 with the passing of the Tax Cuts and Jobs Act (TCJA). Today, you're able to deduct the interest paid on $750,000 (lowered from $1 million) or half that if you're married and filing separately.

 

DISCOUNT POINT DEDUCTIONS

 

If you have a long-term mortgage, you may be purchasing discount points to reduce your interest rate. If you are, the points you purchase may be deductible from your taxes, assuming they meet the standards set forth by the IRS.

 

The rules governing how points are deducted from taxes changed with the TCJA and are limited to the first $750,000 spent on a loan (similar to the mortgage interest deduction).

 

INDIANA HOMESTEAD EXEMPTION

 

If your new home is Indiana, you may qualify for the homestead exemption.

 

The deduction applies to your home and up to 1 acre of land. The homestead exemption gives homeowners a deduction on their assessed property value. The deduction is for 60 percent of the assessed value of their home with a maximum value of $45,000.

In order to receive this tax benefit, the property must be your primary home of residence. You will need to apply by the end of the year for the exemption to be effective on the following year's tax bill. Contact your county auditor for application details. 

 

When you make a change to your home's title - such as a name change after a marriage - you will need to re-file the homestead exemption. You'll also need to have it removed when you move. 

 

INDIANA MORTGAGE CREDIT CERTIFICATE

 

Indiana residents can apply for a mortgage credit certificate through a program offered by the Indiana Housing & Community Development Authority.

 

The IHCDA Mortgage Credit Certificate may be claimed every year for as long as you have a mortgage. The mortgage credit certificate provides a reduction of federal taxes for borrowers. Reductions are between 20 and 24 percent of a borrower's mortgage interest, with a maximum reduction of $2,000 a year.

 

ENERGY CREDITS

 

Homeowners who install a system to operate their home on solar, geothermal, or wind energy can receive tax credits.

 

Tax credits operate differently than deductions; they are a dollar-for-dollar reduction in the amount of money owed for taxes. If you install a new system on your home between now and the end of 2022, you can receive 26 percent of the install cost back in tax credits. If you owe no taxes at the end of the year, the credits can be rolled forward to the next year.

 

LET ORIZION HELP YOU FIND THE RIGHT HOME THIS YEAR

 

If you're looking to purchase a home this year, our team of talented real estate agents at Orizon Real Estate are at the ready to help.

 

We're not tax experts (seriously, make sure you chat with a CPA to get the most tax benefits), but we are experts at home buying. Call 260-248-8961 to connect with an Orizon Real Estate agent today!