Every year my taxes are getting more and more complicated. My 2006 return consisted of both income from Illinois and Massachusetts. My 2007 return added self-employed income for the first time. My 2008 return added a solo 401k account and a home purchase. Looking towards the future, my 2009 return will add itemized deductions. I took advantage of the tax software to do some research on the tax system with regards to the first-time home buyer tax credit, mortgage interest and real estate taxes.
First Time Home Buyer Tax Credit
All you need to know about the first-time home buyer tax credit, bullet style:
Mortgage Interest Deductions
In general, you may deduct your mortgage interest if your mortgage balance does not exceed $1,000,000 and you took out your mortgage to buy, build or improve your home. Here are the fine details, in numerical list style:
Wow, pretty confusing. Mine will definitely be deductible. Considering I nearly reached the standard deduction value with two months of mortgage interest and self-employed tax deductions, I am in line for a pretty large deduction increase next year. (IRS Pub. 936 has more info about mortgage interest).
Real Estate Taxes
Real estate taxes are significantly easier to understand. You can deduct real estate taxes that you paid on your home throughout the year. That’s it. Well, almost. The amount of money you pay to your escrow throughout the year is not the amount that you deduct. The amount you deduct is the amount that was actually paid to the IRS.
Does anybody have any advice for a new home owner with regards to taxes?
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