How Will Buying A Home Affect Someone's Tax Filing?

How will buying a home affect someone's tax filing? If you've recently purchased a home, you may already be aware that there may be some definite tax advantages to home ownership. When tax season rolls around, you'll want to be aware of what those benefits are.

"Buying a home, mortgage interest is deductible on your Schedule A; so if you itemize right now, if you're single you get a $5,000 standard deduction, if married, you get a $10,000 standard deduction," Explains Brian K. Gilroy, a Florida Real Estate Attorney and CPA. "If you're itemized deductions are going to be greater than the $5,000 or $10,000 then you file what's called a Schedule A, which itemizes, and that's where your mortgage interest is deductible."

In January, you should receive a Form 1098 from your lender, most likely included with your statement. This will tell you the amount of mortgage interest you've paid in the previous tax year.

Besides your mortgage interest, home ownership offers additional deductions. "Your real estate taxes are deductible. Points you pay when you buy a house are deductible, when you buy a house that year, points when you refinance are deducted over the life of the mortgage," Gilroy says. "Points" are defined by the IRS as, "charges paid, or treated as paid, by a borrower to obtain a home mortgage. Points may also be called loan origination fees, maximum loan charges, loan discount, or discount points (Internal Revenue Service Publication 936, for use in preparing 2005 returns)."

If your move was job-related, other possible deductions you should look into are moving expenses. If you moved because your company transferred you, or because of a new job, you may be entitled to deduct such expenses as the moving of your personal effects from your old home to your new home, as well as costs of traveling to your new home, such as gas, oil, tolls, parking fees, and even lodging. Be sure to keep such items as a milage log, receipts, cancelled checks, etc., to show your expenses. Keeping good records in general, during and after the home-buying process, will make it easier to file your tax returns.

Of course, not all of your homeowner expenses are deductible. Some things you will not be able to deduct are your utility payments, homeowners association fees and dues, principle payments made on your mortgage, title insurance, or homeowners insurance premiums.

If you've recently moved into your new home, one thing you can do to ensure that any correspondence with the IRS is not lost or misdirected, or that any possible refunds to which you are entitled are not delayed, is to notify the IRS of your change of address. You can do this by notifying the U.S. Postal Service, or, more directly, you can notify the IRS by sending a Change of Address Form (Form 8822).

If you are in the habit of filing your own tax returns, after the purchase of a home, it would be a worthwhile investment of time and money to seek out the advice of a tax professional.

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