Did you buy your first house in 2016? You're in for a brand-new tax experience, but the good news is you might be in position to save a lot of money by itemizing your taxes.
If you bought your first house in 2016, you're in for a brand-new tax experience this year. This may be the first time you've had to itemize your taxes, but it's surprisingly easy to do.
To file with the least amount of headaches, start by locating your disclosure agreement, which is typically part of your home closing paperwork that you receive from the title company or your mortgage lender. Next, you'll want to add up the four main real estate deductions:
- Loan costs and fees. Your lender charges different fees, which are spread throughout the closing disclosure agreement. Look for the application fee, underwriting fee, origination fee, and loan costs, to name a few.
- Mortgage interest. You get to deduct the entire interest portion of your mortgage payment, which will typically be your biggest deduction for the year. This is especially true when you first start out on your mortgage as that's when you'll pay the most interest on the loan.
- Property taxes. You can deduct your property taxes, but only for the portion of the year that you've lived there. If you negotiated to have the seller pay the property taxes for the whole year, in many cases you can still deduct property taxes for the portion of the year you've lived there.
- Mortgage insurance. If you didn't put 20% down when you bought the home, you'll probably have mortgage insurance. This is not the same thing as homeowners insurance.
Other items you might be able to itemize include furniture you gave away or other charitable donations. If you work from home, you might be able to deduct your office space and supplies.
This doesn't just apply strictly to new homeowners.
If you add up all those deductions and the total is less than the standard deduction of $6,300 for a single person or $12,600 for a married couple, you probably won't need to itemize your taxes. If your itemized total is more than the standard deduction, you will save some money on your taxes this year.
This doesn't just apply to new homeowners, either. If you've been living in your current home for more than a year and you haven't been itemizing your taxes, you can start now because in many cases, mortgage interest, mortgage insurance, and property taxes are recurring deductions. You can also apply them this tax season.
If you have any other questions about this topic or you're thinking of buying or selling a home this year, don't hesitate to give me a call or send me an email. I'd be glad to help!
