Home Buying Tax Deductions Tips

Buying an Oregon City house is the most expensive investment that you can make. However, if you know what tax deductions can work in your favor, you can bring down the cost of paying the interests. Here are some tax breaks that you can take advantage of:

  1.    Mortgage payment interest deduction

When you buy a Canby home, you are qualified to receive a tax break from the mortgage interest deduction. This deduction can cover as much as $1 million worth of interest loans.  If you are a first-time home buyer who acquired a new mortgage, this can help relieve yourself from the burden of paying the high-interest loan.

Normally, your first payment will have the higher interest to principal ratio so this is where you will receive the majority of the tax benefits upfront. To avail of this tax break, you need to file an itemized tax return. The lender will give you Form 1040 after the tax year end which will outline the interest that you have paid for that year.

  1.    Mortgage credit certification

The mortgage credit certification program is a great way to help lower-income individuals afford home ownership. The good thing about this tax benefit is that it directly lowers the total amount of your tax bill which lowers what you owe.

This tax incentive is not that popular yet but it is by far the most helpful. A homebuyer can get as much as 20% to 30% of the interest they pay every year on their mortgage back to their pocket. This is a federal credit that is being implemented by the state and local governments which can vary from one state to another.

  1.    Mortgage points deduction

Even before the actual interest incurred after securing the mortgage, the buyer already pays the interest on mortgage points.  Mortgage points are necessary to allow the buyer to qualify for a mortgage with lower interest. Since mortgage points have prepaid interest, it qualifies for deductions. The tax break can be small but as long as it helps reduce your payment, it can be of great help.    

  1.    Tax-free IRA withdrawals

If you need extra money to pay for the down payment or other costs, you can consider pulling funds from IRA. This method is beneficial as it doesn’t give the 10% penalty normally applied to pre-age 59 1l2 withdrawals. This can also be availed by current homeowners who haven’t purchase another house in two years.