9 Potential Tax Advantages for Buying a Home Before the Year-end Offers
Published On October 16, 2023
As the year draws to a close, many potential homeowners in Kenosha, Wisconsin, might be contemplating the ideal time to make their move. While the allure of a new home is undeniable, the financial implications often play a pivotal role in the decision-making process. Fortunately, purchasing a home before year-end comes with a slew of tax advantages that can make the investment even more worthwhile. With the expertise and guidance of Cove Realty, diving into these benefits becomes a seamless experience. Let’s delve into the myriad of tax incentives that await future homeowners in Kenosha.
Here are some of the primary tax benefits:
Mortgage Interest Deduction:
One of the most significant tax breaks for homeowners is the ability to deduct mortgage interest. If you buy a home and take out a mortgage before the year-end, you can start deducting the interest paid from that mortgage on your tax return for that year.
Property Tax Deduction:
Homeowners can deduct the property taxes they pay on their primary residence. If you buy a home before the year-end and pay any property taxes, you can deduct those payments on that year’s tax return.
Points Deduction:
If you pay points to obtain a better mortgage rate when you buy your home, these points are deductible in the year you paid them. This can be a substantial deduction, especially if you buy your home later in the year and don’t have much mortgage interest to deduct yet.
Home Office Deduction:
If you use a portion of your home exclusively for business purposes, you may be eligible to claim the home office deduction. This can include a portion of your mortgage interest, property taxes, and utilities.
Energy Tax Credits:
If you purchase a home that has energy-efficient features or if you add such features to your home before the year-end, you might qualify for energy tax credits.
Closing Costs:
Some closing costs are tax-deductible, such as property tax or mortgage interest that you prepay at closing. By purchasing before the year-end, you can take advantage of these deductions for the current tax year.
Capital Gains Exclusion:
While this isn’t an immediate benefit, it’s a long-term one. If you live in the home for at least two of the next five years, you can exclude up to $250,000 ($500,000 for married couples) of the gain from the sale of your primary residence from your income.
Medically Necessary Home Improvements:
If you make home improvements for medical reasons, such as adding ramps or modifying bathrooms, those costs can be deducted as medical expenses.
Moving Expenses for Work:
While recent tax law changes have limited this deduction for many people, some active-duty military members can still deduct moving expenses related to a change of station.
Building Equity:
While not a direct tax advantage, by buying a home, you start building equity. Over time, this equity can be leveraged for other financial opportunities that can offer tax advantages.
It’s essential to consult with a tax professional or accountant to understand fully and take advantage of the tax benefits associated with homeownership. Tax laws can be complex and change over time, so professional advice is invaluable in maximizing your benefits.
Let Cove Realty guide you to your perfect home or investment before year-end.
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