People who file their taxes are expecting 1 of 3 outcomes. They will either pay more taxes, owe nothing in extra taxes or get a nice tax return. While the third option seems to be great because you will receive money from the return, you actually loaned that excess money to your state government or federal government without charging interest!
In most cases, when a buyer purchases a home the property taxes are prorated from the date of closing. So from the 1st of the year until the date of closing, the sellers are responsible for that payment. That amount is then escrowed and given to the buyers at closing. Then at the end of the year the buyer is responsible for the total payment owed to the taxing authority.
- The Internal Revenue Service (IRS) provides several tax breaks to make homeownership more affordable.
- Common tax deductions include those for mortgage interest, mortgage points, and private mortgage insurance (PMI).
- To claim the deductions, you have to itemize your taxes rather than taking the standard deduction.
- Tax credits are available for qualified first-time homebuyers and homeowners who invest in energy improvements like solar panels and energy-efficient windows.
You can deduct some of the ongoing payments you make for owning your home, including:
- Real estate taxes actually paid to the taxing authority
- Qualifying home mortgage interest
- Mortgage insurance premiums
You cannot deduct these:
- Property insurance
- Depreciation
- Utility payments
The standard deduction for the 2024 tax year is $29,200 for couples filing jointly, and $1,460 for singles. That’s up from $27,700 for couples and $13,850 for singles in 2023.2 You might do a quick calculation of your deductions and see if the standard deduction saves you more.
Links:
https://www.investopedia.com/articles/personal-finance/051915/what-are-tax-advantages-when-buying-home.asp