Are you looking to buy a house?
Planning for buying a house is a process that can be quite stressful, especially when thinking about potential tax implications. Let’s take a look at the documents you need to save and the tax issues you will need to consider.
Buying a House
The new Closing Disclosure Form is one of the most important documents in the home-buying process. In an effort to better inform homebuyers of the terms of their mortgages, the old HUD-1, “Settlement Statement,” has been replaced with the Closing Disclosure Form.
Every homebuyer should receive this document and keep it in a safe place. This form basically gives a picture of all the closing transactions and provides a complete list of incoming and outgoing funds. The statement helps determine the basis of your new home, as well as what you can deduct on your taxes.
Extra Tax Benefits
After purchasing a home, it may be beneficial to start itemizing if you weren’t already. As a homeowner, you can now deduct your:
- Qualified home mortgage interest
- Points paid on a loan
- Real estate taxes
- Private mortgage insurance
As a new homebuyer, you will want to be on the lookout for Form 1098, “Mortgage Interest Statement” which is used to report mortgage interest, including points. This form can help you claim these deductions on your Form 1040. Typically, Form 1098 is mailed to you in January.
Even if you don’t itemize, you may benefit from other tax advantages of becoming a homeowner, such as:
- Penalty-free IRA withdrawals if you are a first-time homebuyer under the age of 59 ½ or Residential energy credits
- Form 5329, “Additional Tax on Qualified Plans and Other Tax-Flavored Accounts,” can be used to claim the IRA penalty exception. Form 5695, “Residential Energy Credits” can be used to claim any potential residential energy credits.
If you want to learn more about this, contact un now!
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