What are the tax benefits for homeowners in Tomball? Local Realtors answer questions about trends and offer tips to homebuyers and sellers considering buying or selling a home in or around Tomball and Magnolia. This article first appeared in a story by Community Impact, you can read the original piece here.
What are the tax benefits for first-time homebuyers?
One of the tax breaks for owning a home is from deducting mortgage interest. Mortgage interest deduction allows the homeowners to reduce their taxable income by the amount of interest paid on their principal residence loan. Sometimes, this deduction can be taken on a second home. You may also deduct points paid at closing, as long as the amount was paid with your own cash and the amount equals your down payment. Closing points are paid to either the lender or broker—one point equals 1 percent of the total loan amount. Homeowners can also deduct real estate taxes paid each year. Mortgage insurance premiums may also be deducted for mortgages issued after 2007. When purchasing your home, if you make less than a 20 percent down payment, you pay for mortgage insurance. Mortgage insurance is used to protect your lender should you default on the loan.
Are there any other tax deductions or credits for homeowners?
The potential deduction from school tax is $25,000. Homeowners whose county collects special taxes for FM roads or flood control could receive a $3,000 deduction. First-time homebuyers can be eligible for a penalty-free Individual Retirement Account payout of up to $10,000 from their IRA to help buy or build their first home for themselves, spouse, kids, grandkids or parents. The $10,000 is a lifetime cap. You must be a first-time homebuyer and purchase your home within 120 days from the time the amount is withdrawn.
Are there any tax deductions for going green?
Yes, the residential energy efficiency property credit. Solar credits are good through 2019 and will be reduced each year through the end of 2021. Solar, wind, geothermal and fuel-cell technology are the equipment that qualifies for the residential renewable energy tax credit. Energy from solar panels, or photovoltaics, must be used in the home. Water heaters that are solar-powered must also be used inside the home, and at least half of the home’s water heating must be solar. Solar panels used to heat swimming pools and hot tubs do not qualify.
Is there anything homebuyers need to do to qualify for or maintain these tax breaks throughout the year?
Most of these tax breaks do require you to maintain the home as your primary residence. New homeowners will need to file a homestead exemption, which removes part of your home’s value from taxation, for the homeowner’s principal residence. The appraisal districts have forms available online.