If you bought your first home in 2016, chances are you’re in for a very new tax experience this year.
That’s because for many new homeowners, buying a house is the first time it makes sense to itemize taxes.
The good news is that itemizing your taxes is surprisingly easy to do.
Here’s how to make sure you save the most on taxes while minimizing your filing headaches.
First, locate your Closing Disclosure Agreement. This is a part of your home closing paperwork provided by your lender.
Second, add up the following four main real estate deductions:
- Loan costs and fees
These are different fees charged by your lender and spread throughout the Closing Disclosure Agreement.
Different lenders will call them by different names. Look for the items “application fee,” “underwriting fee,” and “loan costs.”
- Mortgage interest
You can deduct the entire interest portion of your monthly mortgage payments.
This will probably be your biggest tax deduction, particularly at the start of your mortgage when interest payments are highest.
- Property taxes
You can deduct property taxes — but only for the part of the year that you owned the house.
Amazingly, you can claim this deduction even if you managed to negotiate with the seller to have them pay the full year’s property taxes.
- Mortgage insurance
If you’ve put down less than 20%, you probably have to pay for private mortgage insurance. The good news is this item is also tax deductible.
By the way, mortgage insurance is entirely different from homeowners insurance, which isn’t tax deductible.
There are a few other items you might also be able to itemize.
For example, if you gave away furniture or appliances before moving, this can be deducted as a charitable donation.
And if you work from home, you can claim additional deductions for that.
Now, add up all those deductions.
Is the total less than the standard deduction ($6,300 for an individual, $12,600 for a married couple)?
If it is — congratulations, you will save more this year by itemizing your taxes.
By the way, we’ve been talking this whole time about new homeowners.
But even if you’ve already owned your home for a while but you haven’t been itemizing your taxes yet, you can definitely start doing so.
Points two through four above are recurring deductions, and you can also apply them this tax season.
Also, if you did not buy a house in 2016 but you’re considering doing it this year, make sure you check out all the available listings in the New Orleans Northshore and Southshore areas:
And if you didn’t purchase a home in 2016, but you’d like to in 2017 give us a call at 985-778-2525. We’re ready to help you get started!