Financial Perks of First-Time Homeownership
If you’re thinking of entering the home market for the first time, there’s no question there are some challenges ahead of you. Being a first-time homebuyer comes with several new experiences to navigate, which is part of what the professionals at Primary Residential Mortgage are here to help with. We are a trusted local mortgage lender serving all of Southwest Florida including Fort Myers, Lehigh Acres, Naples, and Sarasota.
We’re also here to show you the flip side: While being a first-time buyer can be challenging, it can also be highly rewarding. We’re talking about more than just the numerous perks of owning your own home, too – there are actually several distinct financial benefits that come along with buying your first home. Let’s look at a few prominent areas here and make sure you’re in position to take advantage of all these perks you qualify for.
Tax-Related Areas
There are several significant tax deductions you might be eligible for after purchasing a home:
- Interest deduction: At the end of each year you’ll be sent a 1098 tax form by your lender. This form will detail all the information you need to use on tax forms. In many cases, you’ll be able to deduct the total amount of interest you paid for that year on itemized deductions – do know that there’s a limit of $750,000 for qualified residence loans for 2018, and a limit of $375,000 for married taxpayers filing separate forms.
- Real estate tax deduction: You’ll pay property tax through the year in some form, and you can deduct this on itemized deductions as well.
- Points deduction: Many buyers pay points, or prepaid interest, on their loan during closing to lower their monthly payment amounts in the future. In the purchase year, you can usually deduct the full amount of these points.
- PMI: If you are paying private mortgage insurance (PMI) due to not having a large enough down payment, you can deduct PMI expenses on your taxes.
Capital Gains Relief
It’s important in any mortgage situation to think of your home as an investment that you’re paying toward little by little over the year. Eventually, you’ll own it outright and it will be a financial asset. And if you sell your home after at least two years of occupancy, there’s a good chance you’ll be exempt from capital gains taxes on the first $250,000 of profit from your sale.
IRA Down Payment Contribution
Many first-time buyers are allowed to use up to $10,000 from a personal IRA to put toward their down payment. This is a practice that would normally come with a 10 percent tax, but this is waived for many first-time buyers. For traditional IRAs, however, know that you’ll still have to pay taxes when you withdraw funds later on.
PRMI NMLS 3094. PRMI is an Equal Housing Lender. Some products and services may not be available in all states. Credit and collateral are subject to approval. Terms and conditions apply. Programs, rates, terms, and conditions are subject to change and are subject to borrower(s) qualification. This is not a commitment to lend. Florida Office of Financial Regulation MLD646. Opinions expressed are solely my own and do not express the views of my employer.