Tax season is here, so make sure you’re tapping into homebuyer tax benefits. Buying a home requires hefty initial costs, like a down payment and closing expenses. There are a host of things, however, such as federal grants, tax credits and other options you can research to make your first home more affordable. Take note of the first-time homebuyer benefits below, as these can assist with those hefty payments.
Tap into Your IRA
As a first-time homebuyer, you’re eligible to take $10,000 out of your traditional or Roth IRA, without being penalized the 10% early withdrawal fee. You can use these funds to cover down payments, closing costs, etc. Couples are even able to withdraw $20,000 (combined) to pay for their first home. Be sure to access and use these funds within a 120 day period or you will be subject to the 10% withdraw fee.
Mortgage Interest Deductions
Whether you’re a first-time home buyer or not, you’re able to deduct the interest you pay your lender. Pay attention to the 1098 form sent out annually at the beginning of the year, as this will account for the interest you paid. Home mortgage interest is a huge deduction for any homebuyer and can make a big difference come tax season.
With the demand for renewable energy increasing, homeowners can tap into a special tax benefit/credit. By installing solar panels, geothermal heat systems, wind turbines or energy efficient windows and AC units, homeowners may receive a tax credit of up to 30% of the overall costs. It’s a smart move for any first-time homebuyer to install energy efficient equipment in the home, not only to save energy costs but to qualify for this amazing benefit.
The bottom line is that the cost of homeownership extends well beyond the down payment and mortgage payments. Tapping into tax credits or deductions can help bring down the costs that come with buying your first home. Be sure to factor in every cost that comes along with purchasing the home, such as your closing and moving costs, costs of needed repairs (if any), and possible homeownership fees.
Contact a loan professional today to learn more about what you need prior to purchasing your first home!