Tax Tips
Tax Savings for Home Buyers
Don't overlook these deductions if you purchased a home last year.
By Kevin McCormally, Editorial Director, Kiplinger.com
April 6, 2006
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Did you buy a home in 2005? Congratulations on your new digs and on locking in what I'm sure is a terrific mortgage rate. Now, make sure you get all the tax breaks you have coming.
Sure, you can deduct the interest you paid on your mortgage, plus the property taxes on your new place. But did you know you also can deduct any property taxes the previous owner paid in advance for part of the year you actually owned the house? You get that write-off even if you didn't reimburse the seller. Check your settlement sheet.
You also get to deduct any points you paid to get your mortgage. Two points on a $250,000 loan translates to a $5,000 deduction and saves you $1,250 in the 25% income-tax bracket. Oh, you say you're great negotiating skills persuaded the seller to pay the points for you? Believe it or not, you still get to deduct the fee on your tax return. State tax savings can put even more in your pockets.
What about other costs associated with buying, like the title insurance premium or the appraisal fee, a recordation charge or the lawyer's bill? Sorry, but none of them is deductible.