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First-time homebuyers' guide to taxes
There's nothing quite like purchasing your first home.
You're on your own. You have a substantial financial investment.
And you now have some different
tax considerations.
You're probably well-aware that homeownership affords
you several new ways
to save on the annual Internal Revenue Service bill.
"Homeownership is one of the best tax benefits
that the federal government gives out," says attorney Robin
Gronsky, principal of Gronsky Law Offices in Ridgewood, N.J. "People
count on it. It's how they calculate their out-of-pocket costs in
owning versus renting."
What you're probably less sure of is exactly how to
go about taking advantage of all your new house-related tax breaks.
Many first-time homeowners will definitely enter new
tax-filing territory with the very first return they file after
moving into their new abode. For other new owners, the filing changes
might take a little longer to show up.
But all will
need to know some basic tax
rules that could make their
homes a great tax -- as well
as an actual -- shelter.
You survived
the house search and the bidding
process. Getting the mortgage
on your new home was a piece
of cake. But now you've got
to file your tax return for
the first time since you moved
into your first home. Relax.
| You'll probably
find that as a new
homeowner, you'll
save on your taxes.
But there are some
specific things
you need to pay
attention to so
that you get every
available tax break. |
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| 10 tax tips for
homebuyers |
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1. Welcome to Schedule A
As a homeowner, regardless of whether you're a first-timer or have
owned many residences, you probably immediately think "deductions"
when it comes to tax time. That's because you now have the chance
to claim several expenses you didn't face as a renter.
The big-three home-related deductions are mortgage
interest, any points connected with the loan and property taxes.
To claim these, you'll have to itemize.
This deduction method, which requires filing the long
Form 1040 and detailing your various deductible expenses on Schedule
A, is often a new experience for first-time homeowners.
However, before
you rush off to download this new tax paperwork, take
a few minutes to evaluate
your overall filing circumstances.
While many homeowners do benefit
by itemizing, that's not the
case in every situation.
You want to make sure that the deduction method you
choose is the one that gives you the larger deduction amount. If
you find that the standard deduction, which on 2007 taxes is $5,350
for single taxpayers and $10,700 for married couples filing a joint
return, is greater than the total of your itemized expenses, then
by all means take the standard deduction.
Don't worry, you're not stuck using that method forever.
You can alternate between the two deduction options every year or
you can itemize for several years, claim the standard amount for
a few more and then return to itemizing.
The key is to always pick the deduction method
that will give you the most tax savings for each filing year.
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