Learn about what you may be able to deduct as a first-time homeowner.
Most home buyers take out a mortgage loan to buy their home and then make monthly payments to the mortgage holder. This payment may include several costs of owning a home. The only costs the homeowner can deduct are:
- state and local real estate taxes, subject to the $10,000 state and local tax limit
- home mortgage interest, within the allowed limits
- mortgage insurance premiums
Taxpayers must file Form 1040, U.S. Individual Income Tax Return or Form 1040-SR, U.S. Income Tax Return for Seniors, and itemize their deductions to deduct home ownership expenses.
Homeowners cannot deduct any of the following items:
- Insurance, other than mortgage insurance, including fire and comprehensive coverage, and title insurance
- The amount applied to reduce the principal of the mortgage
- Wages you pay for domestic help
- Depreciation
- The cost of utilities, such as gas, electricity, or water
- Most settlement or closing costs
- Forfeited deposits, down payments, or earnest money
- Internet or Wi-Fi system or service
- Homeowners’ association fees, condominium association fees, or common charges
- Home repairs
Note, however, that many of the closing costs from purchasing your home may provide you a tax advantage when selling the home. Be sure to keep copies of the closing statement from your purchase for if you decide to sell the property.
If you would like to discuss this further with a member of our Team, please schedule a consultation using this link: https://calendly.com/karasseipeltax