There may be many possible tax benefits for buying a primary residence through use of tax deductions. Deductions reduce your taxable earnings and therefore result in lower taxes. It is important to understand the tax advantages before buying or when evaluating renting versus buying. This blog post offers information on New Hampshire possible tax benefits for buying a primary residence.
Tax Deduction Requirements
Not everyone is eligible for tax deductions. When completing your taxes, you can use the standard deduction or itemized deductions, whichever is more favorable. If you purchase an inexpensive home, the deductible figures may not add up to more than the standard deduction. Other financial variables may affect this as well. Only a tax consultant can offer a true evaluation of the tax advantages of buying a home taking into account your personal finances.
Deductible Home Costs
Only the interest part of your loan payment is tax deductible. In the early stages of having a property, you spend more on interest than principal. Therefore, the total deductible interest is much higher when you first own real estate than in subsequent years. Your mortgage company will send you a statement every year totaling the mortgage interest paid on your property.
Real estate property taxes may also be tax deductible. Real estate taxes are an annual charge but are normally billed in quarterly increments. These taxes are sometimes included in your mortgage statements, but be sure to keep copies of the property tax bills mailed directly to you. The amount in mortgage statements may not be accurate.
If you first purchased your home within a designated time frame and if you are part of a qualifying income range, you may be able to deduct mortgage insurance fees. MI is invoiced on a monthly basis for mortgages more than 80% of the home value and does not get removed until the loan amount drops below the 80% level.
Consider keeping a the original of your closing settlement statement. Some charges such as points, adjusted real estate taxes, and pre-paid interest could be deductible. Furnish the paperwork to your tax advisor.
The above is information on New Hampshire possible tax benefits for buying a primary residence and is applicable to primary residences. If you purchased investment property, the list of deductions differ. The above is meant strictly as a simple overview. Always consult with a tax professional for sound guidance adapted to your individual situation or to your type of home.